Transferring car ownership. Gift tax?

Langtang

GrumpyDil said:

As above. I'd complete a transfer but would do it on the last day if the month so you wouldn't end up paying two lots of car tax for a month.

I just did that, changing from monthly to annual payments.

Aretnap

hoofy said:

jimjames said:

hoofy said:

Online valuations put the car at around 5k so some tax would be due if she were to gift the car to me.

What tax do you think is due?

I thought gift tax was due if the value of the gift was over 3.5K, seems I'm mistaken.

It's a common misconception. There is no tax to pay on gifts, either for the gifter or the giftee.

The exception comes if you die within 7 years of making a gift - in which case, subject to various allowances, the gift can still be counted as part of your estate for inheritance tax purposes. Essentially it's to stop people avoiding inheritance tax by giving away everything they own on their deathbeds.

Is your mum wealthy enough that her estate is likely to qualify for IHT? If so you don't need to do anything but she should keep a record of the gift somewhere - it might make things easier for her executor when the time comes. If she is clearly nowhere near the IHT threshold then the problem doesn't arise and neither of you needs to do anything. 

The belief that gifts of over £3.5K are taxable per se seems to come mainly from Telegraph articles urging their readers to make use of their £3.5K annual tax free gift allowances. The Telegraph seems to assume that everybody is (a) rich enough to pay inheritance tax and (b) going to die within the next seven years. However while these things might be true of most Telegraph readers, they're not true of the average person.

talexuser

I thought the gift allowance was £3000, could be split between different people and one allowance could be forwarded to the following year if not used, but only for one tax year. Then you can give unlimited amounts of £250 each to different people to the recipients of the main allowance. And there are extra weddings rules.

Langtang

talexuser said:

I thought the gift allowance was £3000, could be split between different people and one allowance could be forwarded to the following year if not used, but only for one tax year. Then you can give unlimited amounts of £250 each to different people to the recipients of the main allowance. And there are extra weddings rules.

Does that mean that we could gift £6k each this year, as we didn't gift anything last?

MX5huggy

Langtang said:

talexuser said:

I thought the gift allowance was £3000, could be split between different people and one allowance could be forwarded to the following year if not used, but only for one tax year. Then you can give unlimited amounts of £250 each to different people to the recipients of the main allowance. And there are extra weddings rules.

Does that mean that we could gift £6k each this year, as we didn't gift anything last?

Yes, but this is only relevant if you die in the next 7 years and you will paying IHT. You can give however much you like to whoever you like as often as you like  and neither party pays tax. 

Keep_pedalling

Langtang said:

talexuser said:

I thought the gift allowance was £3000, could be split between different people and one allowance could be forwarded to the following year if not used, but only for one tax year. Then you can give unlimited amounts of £250 each to different people to the recipients of the main allowance. And there are extra weddings rules.

Does that mean that we could gift £6k each this year, as we didn't gift anything last?

You can gift as much as you like, but anything over your allowances just takes takes 7 years to drop out of your estate. There is no tax downside to making larger gifts and if your estate is large enough to put it in IHT territory then it is probably a good idea to do so.

So if as a couple you gave away £50k today, but had not used your annual allowance in the last financial year, £12k of that gift would be instantly removed from your estates and the remaining £32k would fall out after 7 years provided you did not meet an untimely death.