Tax on payments to a family member

Reaper

I help my mother out with financial matters since she is not confident using a computer or dealing with money. For this she insist on paying me £100pw even though I tell her it is not necessary.

What implications does this have for tax? No company is involved, just money passing between 2 people.

For example does it count as my income (income tax), or is it an ongoing gift (maybe inheritance tax)? Or something else?

Keep_pedalling

Although you say pays you we are really talking about gifting here, which has no income tax implications, and is well within her £3000 annual IHT exemption so unless she is making substantial other gifts then that is not an issue for her estate even if it is within IHT territory. 

zagfles

Keep_pedalling said:

Although you say pays you we are really talking about gifting here, which has no income tax implications, and is well within her £3000 annual IHT exemption so unless she is making substantial other gifts then that is not an issue for her estate even if it is within IHT territory. 

£100pw = £5200 per year. But if it's out of income it might still not cause an IHT issue

Reaper

Keep_pedalling said:

Although you say pays you we are really talking about gifting here

I think you are probably right, but I find it odd. If I sold her my car the money I received for it would not be a gift, but providing a service for money is?

zagfles

Reaper said:

Keep_pedalling said:

Although you say pays you we are really talking about gifting here

I think you are probably right, but I find it odd. If I sold her my car the money I received for it would not be a gift, but providing a service for money is?

Providing a service for money isn't a gift, it's income, but is that what you're doing? If she stopped paying would you stop helping? It's probably a grey area legally, but if you're actually providing a financial service for money particularly managing investments etc, never mind how it's taxed, it would probably be illegal unless you're qualified.

If you sold her your car it wouldn't be a gift but it wouldn't be income either, and it wouldn't be taxed unless you made a profit on it when CGT might apply. Unless you were in business selling cars etc.

Jeremy535897

zagfles said:

Reaper said:

Keep_pedalling said:

Although you say pays you we are really talking about gifting here

I think you are probably right, but I find it odd. If I sold her my car the money I received for it would not be a gift, but providing a service for money is?

Providing a service for money isn't a gift, it's income, but is that what you're doing? If she stopped paying would you stop helping? It's probably a grey area legally, but if you're actually providing a financial service for money particularly managing investments etc, never mind how it's taxed, it would probably be illegal unless you're qualified.

If you sold her your car it wouldn't be a gift but it wouldn't be income either, and it wouldn't be taxed unless you made a profit on it when CGT might apply. Unless you were in business selling cars etc.

I know it's only an example, but cars (other than business assets) are wasting assets exempt from capital gains tax.

Albermarle

Reaper said:

Keep_pedalling said:

Although you say pays you we are really talking about gifting here

I think you are probably right, but I find it odd. If I sold her my car the money I received for it would not be a gift, but providing a service for money is?

Only if her estate is likely to be subject to inheritance tax , is any of this discussion relevant. So is that the case?

Reaper

Albermarle said:

Only if her estate is likely to be subject to inheritance tax , is any of this discussion relevant. So is that the case?

Yes it will be subject to Inheritance Tax

Keep_pedalling

zagfles said:

Keep_pedalling said:

Although you say pays you we are really talking about gifting here, which has no income tax implications, and is well within her £3000 annual IHT exemption so unless she is making substantial other gifts then that is not an issue for her estate even if it is within IHT territory. 

£100pw = £5200 per year. But if it's out of income it might still not cause an IHT issue

Whoops! For some reason I read that as per month.

Keep_pedalling

Reaper said:

Albermarle said:

Only if her estate is likely to be subject to inheritance tax , is any of this discussion relevant. So is that the case?

Yes it will be subject to Inheritance Tax

In which case is this money from excess income or savings?

Reaper

Keep_pedalling said:

In which case is this money from excess income or savings?

I guess it could be either. She has a couple of pensions on top of the state one, plus savings