IHT. Gifts from excess Income. Does normal expenses include occasion expensive holidays

Ebkent

Good morning.
I am recording my ‘normal’ income and expenditure on an Excel sheet so I know what my excess income is so I can gift it to my son.
My estate is over the IHT limits. I am 70 and in good health, but would like to start passing some wealth to my son tax free, just in case.

Establishing my normal expenses was easy, if tedious.
But when it it comes to ‘normal’ holiday expenses it is difficult. I am married.
we have an apartment in Spain, and my 50% cost  of running it is probably about £1,000 per annum (including Spanish wealth tax)
I assume I should put some of this as the cost of holidays, or perhaps under household bills ? Flights are cheap, so we don’t normally spend much on holidays.

My big question is occasionally I will go on a cruise, costing anywhere from £2,000 to £5.000.  Can I treat this as a withdrawal of capital and not as normal living expenses. Covid has not helped as obviously I haven’t been on a cruise for 2 years.
if one can’t treat exceptional items like this as a withdrawal of capital, one asks what is the purpose of having capital ( apart from generating a very small amount of income)

Jeremy535897

You may find this instructive:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14255

pysifr

Unfortunately, there is nothing in that link that covers the question. I have the same issue, and cannot find any relevant guidance. I cashed in capital to take my daughter and two teenage grand-children to Australia. Clearly this was not part of my "normal" lifestyle. But no guidance I have seen actually covers this kind of action.

poseidon1

Ebkent said:

Good morning.
I am recording my ‘normal’ income and expenditure on an Excel sheet so I know what my excess income is so I can gift it to my son.
My estate is over the IHT limits. I am 70 and in good health, but would like to start passing some wealth to my son tax free, just in case.

Establishing my normal expenses was easy, if tedious.
But when it it comes to ‘normal’ holiday expenses it is difficult. I am married.
we have an apartment in Spain, and my 50% cost  of running it is probably about £1,000 per annum (including Spanish wealth tax)
I assume I should put some of this as the cost of holidays, or perhaps under household bills ? Flights are cheap, so we don’t normally spend much on holidays.

My big question is occasionally I will go on a cruise, costing anywhere from £2,000 to £5.000.  Can I treat this as a withdrawal of capital and not as normal living expenses. Covid has not helped as obviously I haven’t been on a cruise for 2 years.
if one can’t treat exceptional items like this as a withdrawal of capital, one asks what is the purpose of having capital ( apart from generating a very small amount of income)

There is a separate thread running in the pensions forum on this subject ( see link)

https://forums.moneysavingexpert.com/discussion/comment/81128715#Comment_81128715

Working your way through that should be illuminating and helpful, since you have a lot to learn and take on board if your executor is  going to be ultimately successful in making a claim for the exemption on your death.

A far bit of record keeping involved, and an ability to understanding the distinction between capital and income on both sides of the income/expenditure divide. 

SeniorSam

That type of holiday is perfectly acceptable as a normal expenditure. Anything that is a normal part of your living, be it holidays or new hobbies can be considered as 'normal expenditure'. Besides which, those cruises are not particularly expensive.  It is always best to keep good records that you can pass on to your family/executors, so that they will have 'exact details' if required. I doubt that such holidays etc would be questioned, it is what you normally do.