Gifts from Income - ISA income

pip895

Until the last year of his life my Dad never made a withdrawal from his S&S isa. Until a few years back he was transferring his full allowance into it.

He regularly made gifts up to the 3k allowance and topped them up at year end with gifts from "excess income". A few thousands each to My sister and I generally. I am now trying to fill in form IHT403 to justify these gifts.

Can some allowance be made for the growth of these isa investments up and above any amounts added? There is a line for "Investments" in table 20 - can you record the investment growth here or do you have to be seen to withdraw this money from the isa for it to qualify?

Tom99

Only dividends count as income not capital growth as such.
Remember Acc fund pay a dividend even though you do not actually see it since it is reinvested in the fund.

Keep_pedalling

Remember that the £3000 annual allowance is part of his annual expenditure, so if for instance he had £6000 excess income that is all that can be claimed.

If he did not keep a good record of his gifting and expenditure, you are going to have a difficult job claiming it.

Tom99

Keep_pedalling wrote: »

Remember that the £3000 annual allowance is part of his annual expenditure, so if for instance he had £6000 excess income that is all that can be claimed.
If he did not keep a good record of his gifting and expenditure, you are going to have a difficult job claiming it.

I would have thought the £3,000 annual allowance can come from capital.

pip895

Tom99 wrote: »

Remember Acc fund pay a dividend even though you do not actually see it since it is reinvested in the fund.

How do you go about finding what that is though! I have always avoided acc funds out side a wrapper for that reason..

Would it be reasonable to pick an estimated value of say 3%.

pip895

Keep_pedalling wrote: »

Remember that the £3000 annual allowance is part of his annual expenditure, so if for instance he had £6000 excess income that is all that can be claimed.

If he did not keep a good record of his gifting and expenditure, you are going to have a difficult job claiming it.

This was my assumption - Dad used to keep very carful records but they got a little haphazard in the last few years..

We have a couple of examples where Dad lent cash to either myself or my sister then when we came to try and give it back he said "Don't bother - I really don't need it - just give half to your Sister". In this case do we count the date as being when the loan was made or when we tried to repay and it changed to a gift?

Tom99

pip895 wrote: »

This was my assumption - Dad used to keep very carful records but they got a little haphazard in the last few years..

We have a couple of examples where Dad lent cash to either myself or my sister then when we came to try and give it back he said "Don't bother - I really don't need it - just give half to your Sister". In this case do we count the date as being when the loan was made or when we tried to repay and it changed to a gift?

I would count it as a gift on the day you were given the cash.
Re the Acc fund dividend you could try Trustnet which may give you the last 2 dividends. Not sure if the fund themselves publish a history of Acc dividends or look at the %age div paid on the Inc version of the same fund and apply the same %age to the unit price of the Acc fund on the ex-div date.

getmore4less

The loan becomes a gift the day you are released from returning the money.
(who will know?)

If the income within the ISA is reinvested it is not surplus income.


Do you need to retain transferable nil rate band or are trying to reduce IHT as it is over the nil rate bands available.

Tom99

getmore4less wrote: »

If the income within the ISA is reinvested it is not surplus income.

Income within an ISA is the same as income outside an ISA so both can be taken into account when calculating gifts from surplus income over expenditure.
Reinvesting income does not count as expenditure.

pip895

getmore4less wrote: »

Do you need to retain transferable nil rate band or are trying to reduce IHT as it is over the nil rate bands available.

We are probably within the NRB but if the house goes for more than expected we could get caught.

pip895

Tom99 wrote: »

Income within an ISA is the same as income outside an ISA so both can be taken into account when calculating gifts from surplus income over expenditure.
Reinvesting income does not count as expenditure.

That makes sense but seems to conflict with what the solicitor was saying.. I will try and get it confirmed when I speak to dads IFA.