Gift tax - Gifting money to my Mum (I'm 25) - Tax free?

mkennedy27118

I’ve extensively scoured the HMRC and the rest of the internet for some light shed on this and can’t seem to get to a conclusive response, so if anybody could help that would be great.

From what I understand, in the UK you are allowed to give £3000 a year in a tax free gift (£6000 if you didn’t use your £3000 allowance the year before). I will try and keep this factual and inquisitive rather than expressing my sheer hatred for this pitiful system, so here we go.

Everywhere I look, it all comes down to inheritance tax. The government wouldn’t want an elderly person being able to give their (already heavily taxed) savings to anyone before they die, because the government need their 40% worth over that magical 325k figure (which is about a one bedroom flat within the M25!), god forbid they couldn’t rinse you for any more than they have for your entire life time hey!

There is also a rule of some form of exemption if you survive 7 years after you sent the gift?

So here is my problem. I’m not retired and I’m not in my 70’s and I really do hope, touch wood, that I won’t be deceased within the next 7 years. I have worked incredibly hard to earn my money, as does everyone else and I have also been privileged enough to pay a huge amount of tax into our system. However, my Mum isn’t getting any younger and with arthritis in her hips, spine, neck, arms and ankles, alongside 2 hip replacements, I want to give her some money so she doesn’t need to swallow her pride to ask and for her to do the things she wants in her retirement, whilst she can still be (albeit unsteadily and not for long) on her feet.

I want to give her £200,000, which in theory falls beneath the £325,000 ‘inheritance tax’ allowance and I’ve already paid a tidy sum in tax to achieve this figure in the first place.

What is the stance on this? Could I gift this to her tax free? Which end pays the tax if it is applicable, me? How much tax would be due? If I did pay tax, could I claim it back if I outlive 7 years?

Any help and explanation hugely appreciated. This £3000 rule was apparently brought in to make sure the government could skin the elderly and their savings but does it have any merit with someone younger gifting money to an elder? And also, if I got taxed for my Mum to inherit the £200,000 and then she died before spending it all, would I then have to pay 40% on it to get the remainder back?!

Thanks in advance for any of you that respond – it’d really help

xylophone

http://webarchive.nationalarchives.gov.uk/20060213211319/inlandrevenue.gov.uk/leaflets/iht2.pdf

The above is archive material showing a former IHT threshold - the current individual allowance is £325,000 - there is a new "family home allowance " from April 6 2017.

You are not proposing a gift into trust, just a straight cash gift to your mother, so see page 6 ff.

The £200,000 becomes your mother's immediately she receives it so then falls into her estate.

00ec25

if you'd spent more time reading effectively rather than ranting you would have found this question comes up very regularly

there is NO tax on giving gifts - give your mother as much as you want, neither her nor you will pay one penny in tax on that gift

if you, as the donor, die within 7 years then, and only then, will the amount of the gift be added back into the value of YOUR , not your mother;s estate, and if your estate is then over the IHT threshold your executors will pay IHT

when your mother dies the money in her bank account is part of her estate so patently counts towards her IHT allowance

if you want to preserve your inheritance given you are a) wealthy and b) obsessed with IHT, go and pay a STEP member for proper tax advice
Society of Trust and Estate Practitioners as they are the IHT avoidance experts : http://www.step.org
using a loan instead of a gift springs to mind

Cliveman_Pieman

There is no gift tax in the UK. There is IHT, but the allowance is in practice 850k (for most), rising to 1m in 20/21, so I don't accept your stance that this is ungenerous.


Leaving aside your gripes about the system, it very poor tax planning for someone in their 20s to give substantial amounts of money to someone in later life. It is wise to do the transfer the other way around, ie from parent to child.


You have not given the value of your mother's estate, which is most crucial, and without it nobody can give meaningful advice. However most of your understanding is wrong, so I would advise an hour with an accountant before you go any further, as DIY tax planning can have disastrous consequences.

xylophone

http://justwillsandlegalservices.co.uk/latest-news/the-7-year-rule-inheritance-tax-and-lifetime-gifts/

https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

may also be of interest.

xylophone

There would be nothing to prevent your making your mother an interest free loan - it might even be an idea to make it against a charge on her property (assuming that she owns one).

Is there a strong possibility that she will need to enter a care home at any stage?

Has your mother granted Power of Attorney?

You and your mother could consider making an appointment with a SOLLA registered adviser to discuss an overall strategy.

https://societyoflaterlifeadvisers.co.uk/

getmore4less

mkennedy27118 wrote: »

I’ve extensively scoured the HMRC and the rest of the internet for some light shed on this and can’t seem to get to a conclusive response, so if anybody could help that would be great.

From what I understand, in the UK you are allowed to give £3000 a year in a tax free gift (£6000 if you didn’t use your £3000 allowance the year before). I will try and keep this factual and inquisitive rather than expressing my sheer hatred for this pitiful system, so here we go.

:Let me fix this for you.

Everywhere I look, it all comes down to inheritance tax.

[STRIKE]The government wouldn’t want an elderly person being able to give their (already heavily taxed) savings to anyone before they die, because the government need their 40% worth over that magical 325k figure (which is about a one bedroom flat within the M25!), god forbid they couldn’t rinse you for any more than they have for your entire life time hey![/STRIKE]

There is also a rule of some form of exemption if you survive 7 years after you sent the gift?

So here is my problem. I’m not retired and I’m not in my 70’s and I really do hope, touch wood, that I won’t be deceased within the next 7 years.

[STRIKE]I have worked incredibly hard to earn my money, as does everyone else and I have also been privileged enough to pay a huge amount of tax into our system. However, my Mum isn’t getting any younger and with arthritis in her hips, spine, neck, arms and ankles, alongside 2 hip replacements,[/STRIKE]

I want to give [STRIKE]her[/STRIKE]my mum some money so she doesn’t need to swallow her pride to ask and for her to do the things she wants in her retirement, whilst she can still be (albeit unsteadily and not for long) on her feet.

I want to give her £200,000, which in theory falls beneath the £325,000 ‘inheritance tax’ allowance

[STRIKE]and I’ve already paid a tidy sum in tax to achieve this figure in the first place.
[/STRIKE]
What is the stance on this? Could I gift this to her tax free?
YES
Which end pays the tax if it is applicable, me? How much tax would be due? If I did pay tax, could I claim it back if I outlive 7 years?

After 7 years the gift(PET) falls out of your estate, uptil then because the gift is below £325k it uses up that amount of your nil rate band leaving less for the rest of your estate which gets taxed at 40% over what is left of the nil rate band(new residential nil rate band may apply if you have kids of your own)

Any help and explanation hugely appreciated.

[STRIKE]This £3000 rule was apparently brought in to make sure the government could skin the elderly and their savings but does it have any merit with someone younger gifting money to an elder? [/STRIKE]

And also, if I got taxed for my Mum to inherit the £200,000 and then she died before spending it all, would I then have to pay 40% on it to get the remainder back?!

Thanks in advance for any of you that respond – it’d really help

Gifting rarely makes a IHT situation worse but this is one of them that can because there is the issue that IF you then inherit the unused amount from your mum it gets added back into your estate(counting twice until the initial 7 years are up) so you have to consider that if her estate will go elsewhere say to grandkids then that won't be a problem.


There are other options but you need to do multi generational planning that takes into account the asset base of those involved..

Keep_pedalling

getmore4less wrote: »

Gifting rarely makes a IHT situation worse but this is one of them that can because there is the issue that IF you then inherit the unused amount from your mum it gets added back into your estate(counting twice until the initial 7 years are up) so you have to consider that if her estate will go elsewhere say to grandkids then that won't be a problem.


There are other options but you need to do multi generational planning that takes into account the asset base of those involved..

And their is always the issue that she may leave all to the milkman or local cats home.

From your rant you clearly have little understanding of how gifting and IHT works, so don't do this without taking good, paid for, advice first.