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Tax and cash gifts to our 2 son.

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royP_2royP_2 Forumite
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Part of the Furniture 10 Posts Combo Breaker
What tax would my two sons need to pay on a cash gift of £12000 each in this current year?
If tax needs to be paid at what rate and is there a way around this?
Thanks.

Replies

  • Keep_pedallingKeep_pedalling Forumite
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    We do not ( currently) have gift taxes in the U.K, so no tax to pay. 
  • royP_2royP_2 Forumite
    150 posts
    Part of the Furniture 10 Posts Combo Breaker
    As I understand it I can give upto £3000 from this years allowance and £3000 from last years allowance which would be tax free. Therefore I could today give £3000 to each of my sons in this current year 2000/2001 and a further £1500 on April 6th using 2001/2002 allowance.
    Is this correct?
    Reason I am asking is that my wife and I are in our 80's and who knows we might not survive 7 years.
  • HappyHarryHappyHarry Forumite
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    royP_2 said:
    As I understand it I can give upto £3000 from this years allowance and £3000 from last years allowance which would be tax free. Therefore I could today give £3000 to each of my sons in this current year 2000/2001 and a further £1500 on April 6th using 2001/2002 allowance.
    Is this correct?
    Reason I am asking is that my wife and I are in our 80's and who knows we might not survive 7 years.
    You can give away as much as you like with no tax to pay. Any gifts over the £3000 you mention in your post remain as part of your estate for seven years. If your estate will not be liable for inheritance tax, then the fact that gifts remain as part of your estate for seven years is irrelevant.

    If your estate will be liable for inheritance tax, It may be useful to consider the following examples, using a gift of £100,000:
    1. Give away £100,000 now.
    £3000 is exempt from using this year's allowance, £3000 is exempt from using last year's allowance. So £94,000 remains as part of your taxable estate for seven years. If you die within seven years, inheritance tax is paid on the £94,000 by your estate. If you survive seven years, the £94,000 is exempt from inheritance tax.

    2. Give away £6,000 now and keep £94,000.
    £3000 is exempt from this year's allowance, £3000 is exempt from last year's allowance.
    The remaining  £94,000 remains as part of your taxable estate indefinitely, and inheritance tax will be paid on the £94,000 by your estate. 

    If you gift away more than £325,000, then separate rules apply, and you would need to consider who will be liable for the inheritance tax, and the benefits of tapering.

    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • Keep_pedallingKeep_pedalling Forumite
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    royP_2 said:
    As I understand it I can give upto £3000 from this years allowance and £3000 from last years allowance which would be tax free. Therefore I could today give £3000 to each of my sons in this current year 2000/2001 and a further £1500 on April 6th using 2001/2002 allowance.
    Is this correct?
    Reason I am asking is that my wife and I are in our 80's and who knows we might not survive 7 years.
    If your joint estates are liable for IHT then it is worth maximising your allowances. You can actually carry over last years allowance, assuming you did not use it, which means you can each give £6000 now and £3000 on April 6th, taking £18,000 out of your estate immediately. If your estate is well under your nil rate bands then just give the money in one lump sum.
  • Mickey666Mickey666 Forumite
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    royP_2 said:
    As I understand it I can give upto £3000 from this years allowance and £3000 from last years allowance which would be tax free. Therefore I could today give £3000 to each of my sons in this current year 2000/2001 and a further £1500 on April 6th using 2001/2002 allowance.
    Is this correct?
    Reason I am asking is that my wife and I are in our 80's and who knows we might not survive 7 years.

    There is also taper relief on PET gifts, so that after surviving three years the rate of tax on the PET gift reduces each year until it is zero after seven years.   Details here: https://www.gov.uk/inheritance-tax/gifts
  • getmore4lessgetmore4less Forumite
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    Mickey666 said:
    royP_2 said:
    As I understand it I can give upto £3000 from this years allowance and £3000 from last years allowance which would be tax free. Therefore I could today give £3000 to each of my sons in this current year 2000/2001 and a further £1500 on April 6th using 2001/2002 allowance.
    Is this correct?
    Reason I am asking is that my wife and I are in our 80's and who knows we might not survive 7 years.

    There is also taper relief on PET gifts, so that after surviving three years the rate of tax on the PET gift reduces each year until it is zero after seven years.   Details here: https://www.gov.uk/inheritance-tax/gifts
    below £325k there is no tax to taper.
  • royP_2royP_2 Forumite
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    Thank you all for your advice, I am begining to believe having read thru the above and looking at the SAGA site that I have no need to worry.
    Because as I now understand it when either of us dies our wills state that our estate goes to the other partner and therefore so does our a IHT allowance [£325k + £325k] £650k, which is below the total of our estate therefore there would be no tax to pay.
    Am I correct on this, sorry to ask another question.
  • purdyoaten2purdyoaten2 Forumite
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    royP_2 said:
    Thank you all for your advice, I am begining to believe having read thru the above and looking at the SAGA site that I have no need to worry.
    Because as I now understand it when either of us dies our wills state that our estate goes to the other partner and therefore so does our a IHT allowance [£325k + £325k] £650k, which is below the total of our estate therefore there would be no tax to pay.
    Am I correct on this, sorry to ask another question.
    Do you mean above the level of your estate? In which case, there is no IHT payable.
  • royP_2royP_2 Forumite
    150 posts
    Part of the Furniture 10 Posts Combo Breaker
    royP_2 said:
    Thank you all for your advice, I am begining to believe having read thru the above and looking at the SAGA site that I have no need to worry.
    Because as I now understand it when either of us dies our wills state that our estate goes to the other partner and therefore so does our a IHT allowance [£325k + £325k] £650k, which is below the total of our estate therefore there would be no tax to pay.
    Am I correct on this, sorry to ask another question.
    Do you mean above the level of your estate? In which case, there is no IHT payable.
    Yes sorry should have read 'above the total of our estate'
  • Keep_pedallingKeep_pedalling Forumite
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    royP_2 said:
    Thank you all for your advice, I am begining to believe having read thru the above and looking at the SAGA site that I have no need to worry.
    Because as I now understand it when either of us dies our wills state that our estate goes to the other partner and therefore so does our a IHT allowance [£325k + £325k] £650k, which is below the total of our estate therefore there would be no tax to pay.
    Am I correct on this, sorry to ask another question.
    If you own a home worth £350k or more your residential NRBs takes your allowance up to £1M so you have even less to worry about.
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