Gifting money to son

bjbyorkshire

Husband and myself are soon to complete on the sale of a buy to let property. If we want to give our son a gift of say £30,000 out of the proceeds will we incur any tax problems by doing it in one gift? Is there any benefit to giving half in this tax year and half in the next?

We will receive this money into an account in our joint names and can do a bank transfer to our son from this. I'm wondering if my husband gifts X amount and I gift same amount from this joint account will this be tax exempt for either our son or us?

Can you foresee any problems or advise any other way of doing this in the most beneficial way for all of us.

We wouldn't be depriving ourselves of assets as we still have money to pay care home fees if necessary. The 7 year rule would apply though.
Thanks

Bluebirdman_of_Alcathays

Gifts are tax free, so no problem there. You mention the
"7 year rule" so I'm assuming IHT - impossible for us to know without you telling us how much your estate is worth. Deprivation of assets - even more difficult, it's all subjective depending on your LA. That said, 30k is small fry as you hint that there are larger assets at play.

CLAPTON

bjbyorkshire wrote: »

Husband and myself are soon to complete on the sale of a buy to let property. If we want to give our son a gift of say £30,000 out of the proceeds will we incur any tax problems by doing it in one gift? Is there any benefit to giving half in this tax year and half in the next?

We will receive this money into an account in our joint names and can do a bank transfer to our son from this. I'm wondering if my husband gifts X amount and I gift same amount from this joint account will this be tax exempt for either our son or us?

Can you foresee any problems or advise any other way of doing this in the most beneficial way for all of us.

We wouldn't be depriving ourselves of assets as we still have money to pay care home fees if necessary. The 7 year rule would apply though.
Thanks

there are no taxes on gifts although the 7 years rule would apply for inheritance tax purposes

noh

Assuming you and your husband haven't already used any of £3000 annual gift exemption this tax year or last you can each gift £6000 to your son this tax year without it being included in your estate for IHT purposes.
You each can then gift another £3000 next tax year.
That takes care of £18000.
The remaining £12000 would be a potentially exempt transfer for IHT subject to the 7 year rule.
https://www.gov.uk/inheritance-tax/gifts

kidmugsy

if you have surplus income you can additionally gift him a regular amount (e.g. by quarterly standing order) that will be free of IHT as long as he can demonstrate, when you die, that it really was income, not capital in disguise. So you'd need to keep good records that nobody will throw out while clearing up a house.

C_Mababejive

Its hard to believe that you cant do what you like with your own money thats been earned and taxed at least once already...sigh...

booksurr

Capital Gains Tax - presumably you have already allowed for that on the sale of the BTL hence you are left with "only" 30k?

Inheritance Tax - obviously the gift will be covered by the IHT rules, so part will be covered by the 3k allowance per tax year each of you gets (with 3k rolled up into this year if you did not use it last year) so 6k from each of you this year but only another 3k each next tax year hence 18k in total) But frankly that is rather a fuss. A straight gift of 30k in a lump sum this tax year will count as 15k from each of you since it appears to be from a joint account. That 15k will count as a Partially exempt Transfer against each of your respective estates for IHT purposes and so will be tax free if you both live for a further 7 years.

Deprivation of Capital - there is no time limit for this and although you say you can still pay for a care home the fact you gave away a lot of money will not be ignored but it depends on your council; at the time what , if any, action they take over it

Tax for son - there is no tax payable by son on anything he receives as there is no gift tax in the UK

bjbyorkshire

Thanks so much folks, just the kind of info I wanted.

Noh, that is what I wanted confirming. Some this year, some from last year and then some more after 5 April. I'm pretty sure that between us we won't be over the IHT threshold. We just feel that gifting some money now would be better than when we're gone.

Also the smaller amounts quarterly might be worth working out.

If we use the joint account for the larger transfers will we will need to keep bank statements so son can prove it was given from both parents or would the transfer be better coming from accounts in each of our single names?

Booksurr, no capital gain on the property unfortunately. Bought for £130.000 by my husband and daughter in 2007, daughter died so husband became sole owner in 2012, he gifted half to me. We have let it for just short of 3 years and clawed a bit back but selling for £112.000 less charges in 2016. This has been a huge learning curve with lots of tears along the way but we feel the need to sell the house and free ourselves of the memories it holds for all of us. Might as well give son a bit of the money now as we have learned to our cost that sometimes life can be very short. Make the most of every day is now our motto.

Thanks again.

kidmugsy

bjbyorkshire wrote: »

If we use the joint account for the larger transfers will we will need to keep bank statements so son can prove it was given from both parents or would the transfer be better coming from accounts in each of our single names?

When we've gifted money we have (i) used our separate accounts, and (ii) written letters to the beneficiary explaining what we've done, the idea being that these letters will be filed away for future reference. Since such money might be used in future, for example, as part of a deposit for a mortgage loan, it's probably worth saying that the money is NOT a loan, but an unfettered gift.

booksurr

kidmugsy wrote: »

When we've gifted money we have (i) used our separate accounts,

there is no need, by definition money from a joint account is always treated as 50/50 for tax purposes

unless of course you really need it to be a sole gift for another reason

kidmugsy

booksurr wrote: »

there is no need, by definition money from a joint account is always treated as 50/50 for tax purposes

unless of course you really need it to be a sole gift for another reason

There may be no need, but it seemed to us "cleaner": after all, we expect to die at different times, and by keeping the gifts separate they can be treated separately in a very simple way. It has also allowed the one of us in better health to do the gifting that's above the annual exemption.