Gifts out of Income - Records

JLRetired

At the beginning of the first lockdown I decided that I would help out my 3 adult children, each of whom was impacted financially either through being furloughed or without a job. These payments are ‘gifts from income’ and are paid monthly via Standing Order. I intend to continue these until such time as I need the money for myself. I own my own house, have pension income of £50k p.a. plus investments in stocks & shares. I have 2 questions:
1. In order to ensure that I keep the appropriate records I looked at IHT403 and was rather put off at the level of detail needed to demonstrate that these gifts do not affect my standard of living.  Is it not acceptable to simply demonstrate that I haven’t drawn on my investments in order to make these payments?
2. In addition to the above, I have always given my children random amounts throughout the year. Examples are spending money for holidays, for meals out to celebrate a special occasion, occasional general financial help. These sums vary between £30 and £150. Do I need to record these?
Grateful for some expert advice!

Keep_pedalling

JLRetired said:

At the beginning of the first lockdown I decided that I would help out my 3 adult children, each of whom was impacted financially either through being furloughed or without a job. These payments are ‘gifts from income’ and are paid monthly via Standing Order. I intend to continue these until such time as I need the money for myself. I own my own house, have pension income of £50k p.a. plus investments in stocks & shares. I have 2 questions:
1. In order to ensure that I keep the appropriate records I looked at IHT403 and was rather put off at the level of detail needed to demonstrate that these gifts do not affect my standard of living.  Is it not acceptable to simply demonstrate that I haven’t drawn on my investments in order to make these payments?
2. In addition to the above, I have always given my children random amounts throughout the year. Examples are spending money for holidays, for meals out to celebrate a special occasion, occasional general financial help. These sums vary between £30 and £150. Do I need to record these?
Grateful for some expert advice!

As far as 1 is concerned, it is a lot easier for you to do now than for your executor to do. I would simply print out page 8 and fill in each year you make Gifts from income. Keep this with a copy of your Will and let your executors know where to find it. Most expenditure can be lumped in one of the few categories on the form so it is not difficult to do this once a year. 

With the amounts your are talking about for your second point they only have to be declaims if in total they exceed your annual allowance (£3000)

Jeremy535897

Remember that it is your executors that will be dealing with the inheritance tax liability, and you aren't around to ask. The IHT 403 is perhaps somewhat detailed, but your tax return enables you to complete the top (income) part easily (and if your affairs don't require a tax return it should be very easy), and for the rest I would look at bank balance at 6 April 2020, add in the figure for income net of tax, look at the balance at the end, and roughly estimate the allocation of expenditure between the different expenditure headings. Obviously expenditure excludes the gifts, but it also excludes exceptional items like a new car, or investments. You may also have capital receipts like sales of investments, cars etc. All gifts should technically be included, unless covered by the £250 per person exemption, or the general £3,000 a year exemption.

It's not an area I have ever dealt with, and no doubt others will have their own advice.

WaywardDriver

Been looking at this myself. Expenditure is mainly direct debits from bank current account and credit card transactions. I export these from the various websites and import into Excel where lookup formulae allocate the transactions to the IHT403 expenditure category e.g. Payee=Tesco, category=Household bills. Unrecognised transactions, including ATM withdrawals, are categorised as Other Expenditure. Then if surplus of Income over Expenditure > Gifts, the exemption is justified.