Annual inherited gift allowance

katies_mum

Good morning,

Our daughter is 21 in August and we would like to give her £20,000 (which is currently in a joint savings account) I understand we can both give her an annual gift allowance of £3,000 each and this can be backdated to the last tax year ending April 2016 and this is exempt from Inheritance tax? So I am right in thinking we can give her £12,000 that would not count in respect of any Inheritance Tax should anything happen to us? and does it work the same if one of us died within 7 years (I`m hoping that we don`t!)

Would we have to make 4 x separate payments of £3000 to show that this is the gift allowance and then one payment of £12,000 or can we just make one payment to her for £20,000.

Sorry if this sounds a little confusing, I`d not really thought about any tax implications and want to make sure we do it right.

Thank you very much

getmore4less

You could give £6k each now and another £3k each in Aug

One payment will do for the 20kjust keep records. the £8k over does not get extra tax just does not fall out of the estates for 7 years.

if your estates are not over £325k each then there is no IHT anyway.

in a months the extra property allowance comes in starting at another £100k each rising to 175k by 2020 if planning to leave a house to a child.

By then unless you have over a £1m you are not going to need to worry about the od few £k and if you are already over £650k some IHT planning is probably worth looking at

xylophone

I am assuming that you want to make a little presentation of the money (cheque in birthday card rather than bank transfer) - you could withdraw the cash from the savings account to your joint bank account and then the gift counts as £10,000 from each of you.

The "carry back/current year" would apply to £6000 from each of you and the PET rules ( if applicable to your own circumstances - size of estate on death etc) to the balance.

https://www.gov.uk/inheritance-tax/gifts

noh

A payment of £6K each before April 5th 2017 and then a payment of £3K each after would remove £18K from potential IHT liability.

£3k each for tax year 2015-2016 (one year backdated)
£3k each for 2016-2017
£3k each for 2017-2018

katies_mum

Thank you for your reply.

Not sure what you mean by another £3k each in August, will this be another gift allowance or the top up to the £20k?

To get the allowance of £6k for 2015-2016 will we have to make this payment to her before 5th April 2017?

Thats good to know, I don`t think our estate will be over £325K each..in my dreams!

katies_mum

Thank you all, your posts must have crossed with my reply. Just got to work out now where to put the money as it is not her birthday until November, but suppose need to get it into her name to get the full £18k gift allowances. Any ideas?

Keep_pedalling

If your joint estate is under £650k (going up to £1M if you have home to leave shortly) then just give her the whole lot now, otherwise give her £14,000 now and the remainder after April 5th which will leave only £2000 falling under the 7 year rule, which is not worth worrying about.

If she happens to be getting married in the near future you are also in a position to gift another £5k each which will immediately drop out your estate.

To make life easier for your executors please document these gifts and keep a copy with your will.

Edit. As it now seems your estate is well below your nil rate bands, you don't really need to worry about when you give the money or how much, but still keep those records.

getmore4less

katies_mum wrote: »

Thank you for your reply.

Not sure what you mean by another £3k each in August, will this be another gift allowance or the top up to the £20k?

To get the allowance of £6k for 2015-2016 will we have to make this payment to her before 5th April 2017?

Thats good to know, I don`t think our estate will be over £325K each..in my dreams!

you are over complicating things, for all practical purposes you can ignore the £3k limit.

the problem with the way stuff like this is worded it sounds like gifts over annual limits the limits get stung for IHT if you die within 7 years.

in most cases they don't unless certain conditions are met
The first is are the gift under the nil rate band(£325k/£650) if they are they just use up a bit of that nil rate band leaving less for the rest of the estate, if that estate is still less than what's left still no IHT.

basic rule of thumb is if your estate won't be liable for IHT within 7years then making gifts makes no difference whatever size they are.

katies_mum

Thank you Keep pedalling

katies_mum

getmore4less, put in simple english that sounds so easy to understand. I reckon then there is no need for us to worry as our estate won`t be over £650k. Sorry to ask but does anything change if something happens to one of us?

booksurr

getmore4less wrote: »

You could give £6k each now and another £3k each [STRIKE]in Aug[/STRIKE]

you mean after 6th April 2017