Gifts from Income

Linton

Gnittih wrote: »

What does IIRC refer to?

If capital is involved in any calculations,it becomes pointless setting up a continuous Direct Debit of Gift, since at some year during this gift making one will probably make a large purchase from capital!

IIRC= if I remember correctly

Keep_pedalling

Linton wrote: »

No, investment gains aren't income. The test is simply expenditure vs income over 3-4 years.

Thanks, I was now aware of the 3-4 year thing. Does not help us though as part of our IHT reduction scheme is to spend capital on ourselves every year.

Gnittih

I am confused!....

My income is such that I do not spend all of it,consequently the surplus gets added to capital,..increasing assets.In a similar way my investments gain in value and are reinvested,again increasing my assets.Future IHT on the increase. After using annual gift allowances and not wishing to use 7 year rule...I thought I could make use of the Gifts from income provision!.

Linton

Keep_pedalling wrote: »

Thanks, I was now aware of the 3-4 year thing. Does not help us though as part of our IHT reduction scheme is to spend capital on ourselves every year.

Gifts from income is useful for those who retired with large annuities. Not so useful now when people retain large amounts of capital.

Keep_pedalling

Gnittih wrote: »

I am confused!....

My income is such that I do not spend all of it,consequently the surplus gets added to capital,..increasing assets.In a similar way my investments gain in value and are reinvested,again increasing my assets.Future IHT on the increase. After using annual gift allowances and not wishing to use 7 year rule...I thought I could make use of the Gifts from income provision!.

But you said large purchases would come out of capital, so you must spend it alll some years. Under those circumstances why would you not want to use the 7 year rule? It sound like rather like me you have reached the stage of life where there is no point in building up further capital because you already have enough to maintain your lifestyle for the rest of your life.

Gnittih

Keep_pedalling wrote: »

But you said large purchases would come out of capital, so you must spend it alll some years. Under those circumstances why would you not want to use the 7 year rule? It sound like rather like me you have reached the stage of life where there is no point in building up further capital because you already have enough to maintain your lifestyle for the rest of your life.

I'm aware I can and will spend and make gifts under th 7 year rule,but where I am confused is that in another members message he says any large sums such as car purchases,say £30000,would be classed as expenditure wrt subtraction from Income for assessing IHT!?.....hence this might effect any large monthly DD I might set up for Gchildren

Linton

Gnittih wrote: »

I am confused!....

My income is such that I do not spend all of it,consequently the surplus gets added to capital,..increasing assets.In a similar way my investments gain in value and are reinvested,again increasing my assets.Future IHT on the increase. After using annual gift allowances and not wishing to use 7 year rule...I thought I could make use of the Gifts from income provision!.

The whole area seems complex and rather ill defined. Contentious areas can only be definitively resolved by the courts. You or your executors may not wish to pay for this. However the distinction between capital and income is fundamental. Saved income becomes capital after about 2 years.

It would appear that interest and dividends are income so you may have some wriggle room there. I have seen it said that the use of capital for a house extension would not be regarded as expenditure. However a car purchase would seem to be rather different unless you were investing in classic cars.

Perhaps you should consult a tax lawyer.

Gnittih

Would all the following be classed as Income?....that I can use to calculate against expenditure.

Occ.Pension
State Pension
Annuity payments
Cash ISA gross interest...reinvested
Equity ISA gross dividends...reinvested

xylophone

http://www.pruadviser.co.uk/content/knowledge/technical-centre/normal-expenditure-facts/

may be worth a read.

Linton

Gnittih wrote: »

Would all the following be classed as Income?....that I can use to calculate against expenditure.

Occ.Pension
State Pension
Annuity payments
Cash ISA gross interest...reinvested
Equity ISA gross dividends...reinvested

Occ Pension, SP and annuities are certainly Income.

Interest and dividends paid into your bank account for expenditure/gifting is income.

If you reinvested money from Inc funds within the ISA mmm perhaps HMRC could argue that they never became income if the cash was paid into the ISA. Interest/dividends from Acc funds even more mmmmm. As far as I can see the various web links dont make this clear, perhaps it wont be clear until there has been a test case.