Avoiding a Potentially Exempt Transfer

Judesman

Can I avoid a Potentially Exempt Transfer by gifting some money to my spouse and then she makes the PET that would fall within the allowance whereas if I made the gift the accumulated total would exceed the allowance? Any thoughts please.

SeniorSam

Gifts between Spouses are not counted in the calculations of taxes. You can gift as much as you like.

From the GOV site .....There's no Inheritance Tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they: live in the UK permanently. are legally married or in a civil partnership with you.

Keep_pedalling

No problem in doing this at all, although if your joint assets are unlikely to reach IHT territory it won’t make any difference, but if IHT is an issue maybe some PETs from both of you may be in order.

Judesman

Thank you. I want to gift some money to my daughters, not a lot but enough to exceed the £3k allowance. So, if I make a gift to one daughter within the allowance, can I make a gift to my wife (Transfers between spouses are free) and then my wife makes the gift to the other daughter within my wife's allowance. This is obviously tax avoidance but, is there any reason why I can't do this? I don't see any problem but.....!

Keep_pedalling

Judesman said:

Thank you. I want to gift some money to my daughters, not a lot but enough to exceed the £3k allowance. So, if I make a gift to one daughter within the allowance, can I make a gift to my wife (Transfers between spouses are free) and then my wife makes the gift to the other daughter within my wife's allowance. This is obviously tax avoidance but, is there any reason why I can't do this? I don't see any problem but.....!

It is quite normal for married couples to make gifts to children joint gifts to maximise your annual allowances. All gifts to our children and grand children are paid from our joint account and are recorded as joint whether they are within our allowances or PETs.

Did both of you use up last years allowances? 

SeniorSam

That is often the way we do it in our family. Each tax year we balance out accounts so that we can both keep making gifts within the gifting allowance.

Judesman

No, we didn't use last years allowance so, as I see it we could both gift £6000 in the current tax year. I am the one in a position to make the gifts so, I will put my wife in funds to enable her to make a £6000 gift. Your references to joint gifts presumably means that a couple could gift £12000 by bringing forward the previous year's allowance.Thanks for your help.

getmore4less

You can back date one year if nothing gifted last tax year

That potentially gives you £6k now and £3k in April EACH 

That's £18k to play with.


At these levels it is pretty easy to make a few  £k disappear by increasing normal spending.

if IHT is a problem then drip feeding £3k/£6k a year  probably won't keep up with something like house going up needs more substantial gifting.



PETS are not a problem in most cases they are IHT neutral for 7 years till the amount drops off..

Keep_pedalling

Judesman said:

No, we didn't use last years allowance so, as I see it we could both gift £6000 in the current tax year. I am the one in a position to make the gifts so, I will put my wife in funds to enable her to make a £6000 gift. Your references to joint gifts presumably means that a couple could gift £12000 by bringing forward the previous year's allowance.Thanks for your help.

Yes, you could make could make a gift of £12k now and another £6k on April the 6th. Do either of your daughters have a wedding coming up? 

Judesman

Weddings all dealt with and I am unlikely to survive another seven years. Anyway, with your help, I understand this now. Many thanks.

Keep_pedalling

Judesman said:

Weddings all dealt with and I am unlikely to survive another seven years. Anyway, with your help, I understand this now. Many thanks.

Sorry to hear that. If your joint assets exceed £1M and your wife is better health than you, then it could be worth her making a larger gift to potentially reduce IHT on the second death.