Tax implications on gifted money

Dh6

Morning all, my parents have spoken about the possibility of gifting me £1000 per month as a sort of advanced inheritance. 

I am financially independent at 35 and own my own home, so the money isn’t needed to cover bills or mortgage payments. 

I have reluctantly agreed to accept the money going forward but I’d like to sound out any tax implications that may occur if we do go ahead with this.

My plan would be to add the £12k PA to my S&S ISA and SIPP in order to achieve my aim of early retirement further down the line.

For context, my parents are both on large final salary pensions who live frugally ( as do I ) and have taken fairly substantial lump sums from each of their pensions.

Any information would be gratefully received, many thanks.

Albermarle

There is no tax on any size of gifts at all . Also you can do what you want with it ,

The only possible issue is when they die , if they have enough assets that they will be liable for inheritance tax , then gifts made over the last 7 years can be taken into account , using a formula . However £6Kpa would be discounted .
In any case they will not pay more inheritance tax by giving money away , and probably less in the end .

Also if they are assessed for local authority care costs , previous gifts can be taken into account . However if they pay for care themselves  ( and it sounds like they will have to ) then previous gifts are not relevant .

So take the money and use it wisely ( or not) 

ps Best not to sign posts with your name and stay anonymous .

Sensory

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

Daliah

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

So if the regular payments are not considered a gift for the giver, what about the recipient? Surely they can't receive a gift if none has been given, so the only alternative would be income? 

Albermarle

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

Yes you are right, but detailed records need to be kept to prove it actually was from income .

Sensory

Daliah said:

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

So if the regular payments are not considered a gift for the giver, what about the recipient? Surely they can't receive a gift if none has been given, so the only alternative would be income? 

Does it matter? It certainly wouldn't be classed as income for tax purposes.

Sensory

Albermarle said:

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

Yes you are right, but detailed records need to be kept to prove it actually was from income .

Bank and credit card statements over several years would be sufficient, highlighting differences in monthly income vs expenditure.

xylophone

Your parents may be considering "regular gifts from surplus income".

https://www.gabyhardwicke.co.uk/briefing-notes/inheritance-tax-exemption-for-gifts-out-of-surplus-income/#:~:text=In order for a gift,one year with another; and

jamesd

Daliah said:

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

So if the regular payments are not considered a gift for the giver, what about the recipient? Surely they can't receive a gift if none has been given, so the only alternative would be income? 

For tax it's just a gift and no tax is due.

If means tested benefits are involved it has the regular payment character of income and would be regarded as income in a means test.

Keep_pedalling

As the gift is over their annual exemption it sounds like tees are gifts from excess income, so you parents need to keep good records of not only the gifts but their expenditure as well otherwise their executors are going to have a hard time when the time comes.

In your position I would also be reluctant, and would try to convince them not to be so damn frugal, retirement is a time to enjoy the fruits of your labours, and if you have a comfortable income then you should make good use of it.

Daliah

Sensory said:

Daliah said:

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax. As long as the money comes from regular monthly income and the payer can still meet their usual living costs, the payments are considered 'normal expenditure out of income'.

So if the regular payments are not considered a gift for the giver, what about the recipient? Surely they can't receive a gift if none has been given, so the only alternative would be income? 

Does it matter? It certainly wouldn't be classed as income for tax purposes.

It’s either a gift or it isn’t.