Tuition fees and inheritance tax

tightnortherner

I am an adult full time student and have to pay tuition fees (not eligible for loan) my mother is interested in paying some of my tuition fees- mostly as she is concerned she is over the threshold for inheritance tax. If I agreed to this and she died within 7 years would I have to pay inheritance tax or is there a bit of a loophole with tuition fees??

Tom99

It will count as a cash gift just like any other gift but remember:
1 - Your mother has a £3,000pa allowance free of IHT
2 - If your mother has surplus income over normal expenditure it's possible she could claim this is a regular gift out of surplus income.
Have you checked she is right in saying she is over the IHT threshold?
This cash gift would reduce her nil rate band so there would be no IHT as such on the gift itself but it might increase the tax payable on the rest of her estate if she dies within 7yrs.

Brynsam

The estate pays IHT, not you personally (although if you are the sole beneficiary it comes to the same thing).

As the above answer suggests, worth checking if her understanding that she may be over the IHT threshold is correct, particularly if the bulk of her estate is a property which will be left to her child(ren) - the Residence Nil Rate Band might help: https://www.moneyadviceservice.org.uk/en/articles/a-guide-to-inheritance-tax

gettingtheresometime

Would it be classed as a gift if Mum made a payment directly to the student loan company rather than via the OP?

Tom99

gettingtheresometime wrote: »

Would it be classed as a gift if Mum made a payment directly to the student loan company rather than via the OP?

Yes ........

Flugelhorn

What are you using to live on?

I wonder whether it is worth investigating this further? - you could pay the fees and mother could give you help with living costs

Gifts to help with living costs
Gifts to help pay the living costs of an ex-spouse, an elderly dependent or a child under 18 or in full-time education might be exempt.

also - this article discusses it https://www.ft.com/content/ba24b034-502b-11e7-a1f2-db19572361bb

xylophone

directly to the student loan company

The OP says that he is not eligible for a loan so what would SLC have to do with it?

Malthusian

If she's seriously interested in reducing her Inheritance Tax liability she should see an FCA-authorised Independent Financial Adviser, not fiddle around at the edges with paying tuition fees.

Paying your tuition fees isn't a bad idea, it's just not likely to make a huge difference in the grand scheme. If she's got over £1 million in assets (with two NRBs and RNRBs) then the increase in her assets from inflation this year could be more than your tuition fees.