Cash gift fairness

getmore4less

It is extremely rare for anyone to have to pay tax on a gift they receive.

THere is not tax at the time of giving.

it needs a large set of gifts and a chain of events(including people dying) that leaves an estate without the funds to pay any IHT due.

For all practical purposes and total gifts in the last 7 years below £325k here will never be any tax.

Taper relief does not kick in either until the gift are over £325k.

getmore4less

Other gifts count towards the value of your estate. There may be Inheritance Tax to pay if you’ve given away more than £325,000, but only if you die within 7 years.

Inheritance Tax on gifts is paid by the person who received the gift (the ‘beneficiary’) - not the estate.
.........
The 7 year rule
If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the 3 years before you die.

Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief

those are the key bit the rest is just listing exempt gifts that don't count to the total.

What that says is total gifts in 7 years prior to death must be over £325k before any tax is due on those gifts.

Only if over £325k does the recipient have to pay any tax, that is the tax that gets taper relief depending on the timing of the gifts.

ahja

So brother 1 has more money than brother 2 and wants more 'to make it equal', think I can see why brother 2 might be a tad annoyed!

I would be saying to brother 1 that as he is so interested in equality that because he is better off than his brother, he should get less pro rata, which of course he should be 'really happy' to do as he will be being thoughtful towards his brother and getting less of a tax bill - win win, but with his attitude of asking for more, I won't be holding my breath!

ERICS_MUM

jjj1980 wrote: »

I would say give them the exact same amount. Brother 2 should not get a smaller payment just because brother 1 will incur a tax bill, regardless of the end result for brother 1.


Or, as I have seen with the clients I deal with at work, they would be giving brother 2 a substantially higher amount to bring him more in-line with brother 1's wealth.

Completely agree. Brother 1 sounds a charmer !

AylesburyDuck

Putting aside the fact you dont pay tax on cash gifts,
even if you did pay tax (which you dont) brother one needs a life lesson and shouldnt get more, eventually he'll as a high earner find himself in place at work where his heard earned yearly (if he's lucky) pay rise will put him in a higher tax band and despite the pay rise his take home pay is less.
Now that true injustice.
Self entitlement is truly ugly and not to be encouraged.

peachyprice

Dakota_Deville wrote: »

Yes there is - can't beleive so many ignorant people here.
I will post in a few monets from tax site - I know as i paye tax on line and complete tax rets every year

= HERE

Thee is tax to pay - see criteria from HMRC site - we don't know the amounts the op is talking about so tax to pay subject to criter

3. Gifts
There’s usually no Inheritance Tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’.

There’s also no Inheritance Tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime - as long as they live in the UK permanently.

Other gifts count towards the value of your estate. There may be Inheritance Tax to pay if you’ve given away more than £325,000, but only if you die within 7 years.

Inheritance Tax on gifts is paid by the person who received the gift (the ‘beneficiary’) - not the estate.

What counts as a gift
A gift can be:

anything that has a value, such as money, property, possessions
a loss in value when something’s transferred, for example if you sell your house to your child for less than it’s worth, the difference in value counts as a gift
Call the helpline if you’re not sure.

Exempted gifts
You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year - but only for one year.

Each tax year, you can also give away:

wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great grandchild, £5,000 for a child)
normal gifts out of your income, for example Christmas or birthday presents - you must still be able to maintain your standard of living after making the gift
payments to help with another person’s living costs, such as an elderly relative or a child under 18
gifts to charities and political parties
You can use more than one of these exemptions on the same person - for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you haven’t used another exemption on the same person.

The 7 year rule
If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the 3 years before you die.

Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

Who said anything anything about the gift giver being dead/close to dying? Why are you quoting inheritance tax rules?

There is NO TAX on cash gifts under normal circumstances.

da_rule

Dakota_Deville wrote: »

Yes there is - can't beleive so many ignorant people here.

Probably best to check your facts before making such a statement.

Tax will only be payable on the gift if the person giving the gift dies within 7 years of making it. It is payable as inheritance tax but only if the value of the person making the gifts estate (including the value of the gifts) exceeds a minimum of £325,000 (it could be as high as £650,000 if they have inherited some or all of a deceased spouses nil rate band).

There is no tax paid at the time of making the gift. It is the person who receives the gift who is responsible for paying any inheritance tax due on gifts, but this is at a flat rate so it makes no difference whether a person is a basic, higher or additional rate income tax payer (or pays no income tax at all).

How do you think so many people gift their children deposits for houses etc? They do not pay tax on it and they just hope that they will not die within 7 years or that their estate falls under the nil rate limit.

Keep_pedalling

Dakota_Deville wrote: »

Yes there is - can't beleive so many ignorant people here.
I will post in a few monets from tax site - I know as i paye tax on line and complete tax rets every year

= HERE

Thee is tax to pay - see criteria from HMRC site - we don't know the amounts the op is talking about so tax to pay subject to criter

3. Gifts
There’s usually no Inheritance Tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’.

There’s also no Inheritance Tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime - as long as they live in the UK permanently.

Other gifts count towards the value of your estate. There may be Inheritance Tax to pay if you’ve given away more than £325,000, but only if you die within 7 years.

Inheritance Tax on gifts is paid by the person who received the gift (the ‘beneficiary’) - not the estate.

What counts as a gift
A gift can be:

anything that has a value, such as money, property, possessions
a loss in value when something’s transferred, for example if you sell your house to your child for less than it’s worth, the difference in value counts as a gift
Call the helpline if you’re not sure.

Exempted gifts
You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year - but only for one year.

Each tax year, you can also give away:

wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great grandchild, £5,000 for a child)
normal gifts out of your income, for example Christmas or birthday presents - you must still be able to maintain your standard of living after making the gift
payments to help with another person’s living costs, such as an elderly relative or a child under 18
gifts to charities and political parties
You can use more than one of these exemptions on the same person - for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you haven’t used another exemption on the same person.

The 7 year rule
If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the 3 years before you die.

Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

I"m afraid the only ignorant comments being posted here are yours. As others have said there is no gift tax and people can give away as much money as they like. The only time a recipient is ever going to to have to pay anything back to HMRC is if someone gives so much of their fortune away close to their death is if they have not kept enough back for the estate to to be able to meet its IHT bill and that is a very rear occurrence.

The rules you have cut and pasted are for the benefit of people who are actively working on their IHT planning and executors winding up estates. They are also misleading re taper relief only applies to gifts over the nil rate band £325,000.

We have given our children very substantial gifts to get them on the housing ladder and I can assure you they neither had to declare those gifts or pay tax on them. The only thing we have done for tax purposes, is to keep a record of said gifts to give our executors an easy task should we snuff it prematurely.

Pollycat

parentx wrote: »

Two brothers are set to receive a cash gift. Brother1 is on a substantially higher yearly income than brother2.

Brother1 expects to encounter a tax bill from the gift and that the extra tax to be paid on his cash gift (that brother2 won’t encounter) so that the net income from both gifts is the same.

Hello, OP. :wave:

It would be good if you could pop back and confirm in which country you are resident.

And maybe say why #1 thinks he'll have to pay tax on this gift.

parentx wrote: »

Obviously the actual answer is to do what I want or not gift at all if there is squabbling but for the purposes of this exercise let’s assume those options are not on the table.

But those options are on the table, you've said so yourself so just do what you want.

But if you want my opinion

emmatthews wrote: »

I think brother one sounds greedy and ungrateful.

ERICS_MUM wrote: »

Brother 1 sounds a charmer !

it's this ^^^^.

And would be getting nothing at all from me.

getmore4less

da_rule wrote: »

Probably best to check your facts before making such a statement.

Tax will only be payable on the gift if the person giving the gift dies within 7 years of making it. It is payable as inheritance tax but only if the value of the person making the gifts estate (including the value of the gifts) exceeds a minimum of £325,000 (it could be as high as £650,000 if they have inherited some or all of a deceased spouses nil rate band).

There is no tax paid at the time of making the gift. It is the person who receives the gift who is responsible for paying any inheritance tax due on gifts, but this is at a flat rate so it makes no difference whether a person is a basic, higher or additional rate income tax payer (or pays no income tax at all).

How do you think so many people gift their children deposits for houses etc? They do not pay tax on it and they just hope that they will not die within 7 years or that their estate falls under the nil rate limit.

That only applies if the gifts were over the nil rate band.

The gifts use up the nil rate band leaving less for the rest of the estate.

It is extremely rate that IHT on gifts falls back on the recipient.