Inheritance Tax and multiple £250 gifts

Larry_M

Looking at the rules about gifts I see that "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."
http://www.gov.uk/inheritance-tax/gifts

Can this be gifts of actual money? Is there any reason someone couldn't do this once a month, say by standing order?

To explain the situation, my father would like to gift £3000 per year (i.e. £1500 each) to his two grandchildren (my daughter and my nephew). Could he get around this limit by separately gifting both me and my partner multiple £250s as indicated above, which we then combine and pass on to our daughter?

xylophone

to £250 per person

And any gift given to you becomes your money.

You can gift it to your child but then there are rules concerning interest arising on children's accounts (other than tax privileged accounts eg JISA) where the money has been gifted to a minor unmarried child by a parent.


If gifts from a parent produce more than £100 gross income a year, the whole of the income from the gifts is normally taxed as that parent's income. A child cannot get back any tax on that income. Nor can interest paying accounts be registered to have interest paid without tax taken off.

The £100 rule applies separately to each parent

The £100 rule applies to income arising each year. It does not matter whether the money in the account is comprised of part capital and part added interest. The £100 rule applies as long as income is over £100 in any one year for any one child from one parent.

Your father could consider regular gifts from surplus income to his grandchildren.

https://www.howardkennedy.com/media/504667/gifts-out-of-income.pdf

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14255

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht

Keep_pedalling

There is no actual limit on how much he can gift his GC, it's just that anything exceeding £3000 still counts as part of his estate for IHT purposes for 7 years. If he did not use his allowance for the previous financial year he can carry that over this year so both gifts would fall under the exemption.

Is his estate actually in IHT territory ?

Larry_M

Keep_pedalling wrote: »

Is his estate actually in IHT territory ?

Yes, it will be.

Keep_pedalling

Larry_M wrote: »

Yes, it will be.

If he is in good health has a good chance of surviving 7 years, and has sufficient liquid assets to be able to afford to, then he should consider making larger gifts now where there is a stronger chance of early gifts dropping out of his estate.

Taking proffesional advice from a IFA should be considered as well. He needs to keep a record of all gifting to make life easier for his executors as well.

madgagoo

Larry_M wrote: »

Looking at the rules about gifts I see that "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."
http://www.gov.uk/inheritance-tax/gifts

Can this be gifts of actual money? Is there any reason someone couldn't do this once a month, say by standing order?

To explain the situation, my father would like to gift £3000 per year (i.e. £1500 each) to his two grandchildren (my daughter and my nephew). Could he get around this limit by separately gifting both me and my partner multiple £250s as indicated above, which we then combine and pass on to our daughter?

If he has sufficient spare income then he could make a regular gift, by standing order, and it would drop out of his IHT estate immediately. Have a look at https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231.