Gift to daughter

Homewood99

Hi can I give a £30,000 gift from a sale of a house without her incurring tax penalties.

callipygian

Yes but this gift is too large to be exempt from inheritance tax if you were to die in the next 7 years.

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

She would also need to pay tax on interest from the 30K as normal with savings.

HappyHarry

callipygian wrote: »

Yes but this gift is too large to be exempt from inheritance tax if you were to die in the next 7 years.

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

She would also need to pay tax on interest from the 30K as normal with savings.

Sorry, callipygian, but that's unlikely to be correct.

Taper relief only comes into play if the OP has already given away funds in excess of their Nil rate Band (£325,000).

OP, you can give your daughter £30,000 without any immediate tax penalties on either of you.

If you were to die within seven years, then tax may be payable.

The first £3,000 you give is exempt (yearly exemption).

If you didn't give away £3,000 last year, then you can roll back one year, so £6,000 in total of the gift could be exempt.

The remaining £24,000 would remain as part of your estate for the next seven years. If you survive the next seven years then the gift will be entirely exempt from inheritance tax.

If you die within seven years, and you have not made gifts in excess of your £325,000 Nil Rate Band, then your Nil Rate Band will be reduced by the outstanding £24,000. Effectively this means that your estate may be liable to inheritance tax on this gift.

If you die within seven years, and you have made gifts in excess of your £325,000 Nil Rate Band, then the taper relief as mentioned by callipygian above comes into play. In this situation your daughter, rather than your estate, may have to pay the inheritance tax on this gift.