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Confused about tax in gifting friend £20k
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madfistbt
Posts: 27 Forumite

in Cutting tax
Back in 2015, my friend (not related) helped me greatly with the choices I made in investing with my isa allowance, the funds he recommended and I then invested in have done amazingly since then and i've invested yearly.
I would like to gift him around 20k to say thanks as I would not be in this position without him but am confused about tax implications.
Am I right in thinking there will be no tax due from either of us as long as I stay alive for over 7 years? And if not then different rates of inheritance tax kick in depending on the year I die? Or is there any other tax I may be missing?
Thank you
I would like to gift him around 20k to say thanks as I would not be in this position without him but am confused about tax implications.
Am I right in thinking there will be no tax due from either of us as long as I stay alive for over 7 years? And if not then different rates of inheritance tax kick in depending on the year I die? Or is there any other tax I may be missing?
Thank you
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Comments
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You have an annual exemption of £3,000, plus you can bring forward one year's unused exemption. These may reduce the gift to £14,000.
Your nil rate band is at least £325,000 and may be as much as £1 million, so there is very little chance of any inheritance tax being due on the gift, unless you die within seven years of making it, and made massive other gifts in those seven years.1 -
madfistbt said:Back in 2015, my friend (not related) helped me greatly with the choices I made in investing with my isa allowance, the funds he recommended and I then invested in have done amazingly since then and i've invested yearly.
I would like to gift him around 20k to say thanks as I would not be in this position without him but am confused about tax implications.
Am I right in thinking there will be no tax due from either of us as long as I stay alive for over 7 years? And if not then different rates of inheritance tax kick in depending on the year I die? Or is there any other tax I may be missing?
Thank youPlease note - taken from the Forum Rules and amended for my own personal use (with thanks) : It is up to you to investigate, check, double-check and check yet again before you make any decisions or take any action based on any information you glean from any of my posts. Although I do carry out careful research before posting and never intend to mislead or supply out-of-date or incorrect information, please do not rely 100% on what you are reading. Verify everything in order to protect yourself as you are responsible for any action you consequently take.1 -
Jeremy535897 said:You have an annual exemption of £3,000, plus you can bring forward one year's unused exemption. These may reduce the gift to £14,000.
Your nil rate band is at least £325,000 and may be as much as £1 million, so there is very little chance of any inheritance tax being due on the gift, unless you die within seven years of making it, and made massive other gifts in those seven years.
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madfistbt said:Jeremy535897 said:You have an annual exemption of £3,000, plus you can bring forward one year's unused exemption. These may reduce the gift to £14,000.
Your nil rate band is at least £325,000 and may be as much as £1 million, so there is very little chance of any inheritance tax being due on the gift, unless you die within seven years of making it, and made massive other gifts in those seven years.More like a 'death time' allowance. The nil rate band (NRB) is (currently) the sum that your estate has to exceed after your death before inheritance tax (IHT) is potentially due. Many estates can be significantly higher and pay not IHT, as one spouse can potentially inherit the others NRB, there is also an addiitonal residential NRB that applies if property is being left to direct decendants, and bequests to charities are exempt.If you make gifts in the seven years prior to your death, then these potentially form part of your estate1 -
madfistbt said:Jeremy535897 said:You have an annual exemption of £3,000, plus you can bring forward one year's unused exemption. These may reduce the gift to £14,000.
Your nil rate band is at least £325,000 and may be as much as £1 million, so there is very little chance of any inheritance tax being due on the gift, unless you die within seven years of making it, and made massive other gifts in those seven years.
This explains the situation clearly:
https://www.gov.uk/inheritance-tax/gifts
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Thank you, appreciate the replies, so in layman's terms, estate is the value of someone's net worth. And when someone dies their estate has to exceed the £325k allowance (nil rate band) before any inheritance tax is due. But if the gift I sent was prior to 7 years before dying this is no longer considered for any inheritance tax?
So basically I can send my friend £20k and neither of us pay tax if both avoid dying in 7 years?lol
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madfistbt said:Thank you, appreciate the replies, so in layman's terms, estate is the value of someone's net worth. And when someone dies their estate has to exceed the £325k allowance (nil rate band) before any inheritance tax is due. But if the gift I sent was prior to 7 years before dying this is no longer considered for any inheritance tax?
So basically I can send my friend £20k and neither of us pay tax if both avoid dying in 7 years?lol
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madfistbt said:Thank you, appreciate the replies, so in layman's terms, estate is the value of someone's net worth. And when someone dies their estate has to exceed the £325k allowance (nil rate band) before any inheritance tax is due. But if the gift I sent was prior to 7 years before dying this is no longer considered for any inheritance tax?
So basically I can send my friend £20k and neither of us pay tax if both avoid dying in 7 years?lol
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MalMonroe said:madfistbt said:Back in 2015, my friend (not related) helped me greatly with the choices I made in investing with my isa allowance, the funds he recommended and I then invested in have done amazingly since then and i've invested yearly.
I would like to gift him around 20k to say thanks as I would not be in this position without him but am confused about tax implications.
Am I right in thinking there will be no tax due from either of us as long as I stay alive for over 7 years? And if not then different rates of inheritance tax kick in depending on the year I die? Or is there any other tax I may be missing?
Thank youWhile I'd agree with the sentiments above I'd urge a note of caution with such a massive gift. The stockmarket has done well over recent years, a bog standard global equity tracker would have doubled in value over the last 5 years. But stockmarkets can go down as well. What if after making this gift the stockmarket crashed or a prolonged bear market reduced prices by 40% or so? It's happened so many times in the past. Would you then want the £20k back? Or feel resentful at having gifted it?I've helped people in a similar way but would not accept such a large gift in these circumstances, it's them that took the risk, I would not be bailing them out if the investments did badly, so I wouldn't want to share in the profits if they did well. A nice bottle of something maybe, but not £20k !!
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