Money gift from parents

R.J.F

Hiya, my parents are very kindly gifting me £10,000. I’ve never been given a large lump sum of money before and just want to check nobody well get into trouble from the taxman, so I have a few questions. Firstly, can this amount be given at once (probably via cheque)? I read that the maximum amount people can gift in a year is £3,000 (unless it’s parents/grandparents for a wedding or buying a house), but that you can carry over for one year (i.e.: if nothing was gifted last year, £6,000 can be given this year?). But then I read any amount is fine as long as they don’t die within 7 years, at which point you would have to pay inheritance tax on it?
Secondly, is there anything to prevent me using this money to open a help-to-buy ISA? Thanks for any advice offered!

onomatopoeia99

There is no tax on gifts in the UK.

If the person giving the gift dies within seven years then the gift (or some proportion of it, search for "taper relief") is considered part of the estate for inheritance tax purposes.

Goodness only knows what happens with a gift from parents if one of them dies within the seven years, and if this depends on which account (joint or sole) the gift came from. No doubt an expert will be along to clarify.

Exodi

R.J.F wrote: »

Hiya, my parents are very kindly gifting me £10,000. I’ve never been given a large lump sum of money before and just want to check nobody well get into trouble from the taxman, so I have a few questions. Firstly, can this amount be given at once (probably via cheque)? I read that the maximum amount people can gift in a year is £3,000 (unless it’s parents/grandparents for a wedding or buying a house), but that you can carry over for one year (i.e.: if nothing was gifted last year, £6,000 can be given this year?). But then I read any amount is fine as long as they don’t die within 7 years, at which point you would have to pay inheritance tax on it?
Secondly, is there anything to prevent me using this money to open a help-to-buy ISA? Thanks for any advice offered!

There are no restrictions on gifts in the UK. The £3,000 figure you've mentioned applies to inheritance tax (which you've mentioned) may apply if your parents were to die within 7 years. Gifts from joint accounts are deemed to have been gifted jointly from each account holder - ie £5,000 each - which may make you IHT liable on £4,000 instead of £7,000.

There's nothing preventing you using that money to open a HTB ISA - personally in your circumstances I'd open a LISA instead though as it allows you to put more into it (but places restrictions on you withdrawing it without purchasing a house).

74jax

You can gift whatever you want.

My dad gifted me a substantial amount more.

When he died we completely the form listing monies gifted out and the tax was worked off that.

Keep_pedalling

onomatopoeia99 wrote: »

There is no tax on gifts in the UK.

If the person giving the gift dies within seven years then the gift (or some proportion of it, search for "taper relief") is considered part of the estate for inheritance tax purposes.

Goodness only knows what happens with a gift from parents if one of them dies within the seven years, and if this depends on which account (joint or sole) the gift came from. No doubt an expert will be along to clarify.

It can be very tricky for an executor to establish who gave what if the giver does not keep good records, which is why we have documented all ours and keep those records with a copy of our wills.

This is only really important if your estate is going to be close to or into IHT territory and you are giving more than your annual allowances. In this case it probably does not matter providing the OPs parents have not made similar gifts in the previous tax year or they are giving this amount to more than one child, as with the carry over from last financial year this gift is still £2000 below their joint annuL allowances.

newatc

I think I'm correct in saying that you can carry over from one previous year. So if your parents have not given any other gifts (over £2k) in the year they give you the money and the previous year, there will be no IHT payable even if their estate is of the size that attracts it.

R.J.F

Thanks guys, that's great. I totally hadn't considered they'd both have a £3000 gift allowance, plus that again from the previous year and it is from a joint account. I don't expect them to die anytime soon and I'm not sure I'd even be inheriting all that much, just wanted to make sure everything was above board. They haven't given any other gifts like this and I don't expect they'll be in the position to do it again.

And I would have opened a LISA instead if I had a higher income. My partner and I would both like to max our individual HTB ISAs (or LISAs) out before using it and realistically we'd not be able to put anymore than the HTBs £200 a month aside each anyway. The £10,000 will just give us a nice cushion to start really. Also would rather the money not be locked into retirement on the off chance it all goes tits up.

getmore4less

It would be very rare for gifts of this size to ever fall foul of the 7 year rule a have the recipients subject to IHT. They use up the nil rate band and the estate has less to use to reduce its IHT

Also chances of taper relief are minimal total gifts need to be in excess of £325k.

For a couple with a house and kids unless their joint estate is near 1m with house worth £350k as part of that IHT is a non issue.