Tax implications on gifted money

Sensory

Dh6 said:

Thanks for all of the input above, it’s very helpful.

Im still not clear on what it is I’d need to do or my parents need to do.

Would both parties need to keep records of the transactions, if so what do we need to do exactly?

Ive spoken to my parents regarding them having more holidays etc but they’re happy with a weekend away in the Lake District every couple of months. Long haul travel doesn’t appeal to them at all. Before Covid struck they used to have two or three trips to the canaries each year self catering, each to their own!

kind regards DH

Your parents just need to keep records/proof of their income and expenditure, especially over the last 7 years, and every year they can record figures as tabulated on the last page of IHT403 (essentially calculating surplus income).

If you want all bases covered, they can write a letter addressed to you, stating their intentions to establish a pattern of regular gift payments to you out of surplus income.

Sensory

Daliah said:

eskbanker said:

Daliah said:

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.

It is a gift but .....

I would agree. I was only picking up on @Sensory saying it is not a gift.

Where did I say that?

Please consider the context:

• "For example, you can give your child a wedding gift of £5,000 ..."
• "For example, you can give your child a regular payment of £60 a month ..."
• "You can afford the payments after meeting your usual living costs"
• "These are known as ‘normal expenditure out of income'." (as I originally quoted)

Daliah

Sensory said:

Daliah said:

eskbanker said:

Daliah said:

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.

It is a gift but .....

I would agree. I was only picking up on @Sensory saying it is not a gift.

Where did I say that?

Please consider the context:

• "For example, you can give your child a wedding gift of £5,000 ..."
• "For example, you can give your child a regular payment of £60 a month ..."
• "You can afford the payments after meeting your usual living costs"
• "These are known as ‘normal expenditure out of income'." (as I originally quoted)

Sensory said:

Daliah said:

eskbanker said:

Daliah said:

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.

It is a gift but .....

I would agree. I was only picking up on @Sensory saying it is not a gift.

Where did I say that?

Sensory said:

Regular payments are not considered gifts with regards to Inheritance Tax.

here, for instance.

Alice_Holt

jamesd 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? 

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

       I'm afraid that is incorrect. Any income received from voluntary sources - such as from friends and family or from charities - is disregarded completely when calculating benefits. 

    See: 
    https://www.entitledto.co.uk/help/benefits-charity


    However if that income is retained as capital, it is included within the capital limits for claiming means-tested benefits:
    https://www.entitledto.co.uk/help/savings

Albermarle

Dh6 said:

Thanks for all of the input above, it’s very helpful.

Im still not clear on what it is I’d need to do or my parents need to do.

Would both parties need to keep records of the transactions, if so what do we need to do exactly?

Ive spoken to my parents regarding them having more holidays etc but they’re happy with a weekend away in the Lake District every couple of months. Long haul travel doesn’t appeal to them at all. Before Covid struck they used to have two or three trips to the canaries each year self catering, each to their own!

kind regards DH

The issue is all around your parents estate after they die , so in fact the person who will need all the details will be the executor(s) of the will(s), so they can make the correct calculations about any inheritance tax that may be due.
So as another poster said your parents need to keep the details ( you can if you like but it is not strictly necessary) and those details should be available in an understandable form for the Executor.

Of course it maybe obvious, but it is worth pointing out that if your parents estate is not likely to be above the  IHT limits , then none of this really matters anyway .

Dh6

Would I have to declare the gifted money on my own tax returns? 

Massively appreciate the advice offered so far. 

Thanks DH

Albermarle

Would I have to declare the gifted money on my own tax returns

Gifts are not taxable , so no .