Can I gift my net salary to my partner for savings accounts

robj4132

Hello - we are unmarried couple cohabitating for over 25 years years with a grown up son, we own the house mortgage free, and have a solicitors-created mirror's will leaving 50/50 to each other, or our son. I am a 40% tax payer with regular net pay approx £4,000 per month, my partner is retired and doesn't work. I do not submit a self-assessment.  I have a defined benefit pension, but am not yet retired. We have a joint current account.
For the last 20 years I have been giving my partner approx £3000 per month, to invest in savings to avoid me paying 40% on my savings - she has multiple savings accounts, and stays below the £12,500 tax band with interest earned. She does not have another income.
Is this legal - for me to gift my partner £36,000 per year to invest ? Should we declare this somewhere ? We are planning to get married this year - will this have an impact ? Having read about a limit of £3000 per year as a non-taxable gift, I am not panicking that I may owe years of unpaid tax on what would have been my interest.
I'm of the opinion we are not doing anything wrong - and have done this out of innocence, plus I have already been taxed at source in my salary.
Any thoughts or examples or guidance is much appreciated. thank you

born_again

Do you personally have any ISA's?
£20K a year.

DullGreyGuy

robj4132 said:
Having read about a limit of £3000 per year as a non-taxable gift, I am not panicking that I may owe years of unpaid tax on what would have been my interest.

That is in relation to IHT when you die... any gifts over the £3k/year still count as part of your estate (on a sliding scale) and your estate will pay the tax as if you hadnt given the gifts. 

If you marry it does change things a bit because theres normally no IHT on inherentance from a spouse. 

Assuming you arent worried about IHT then you are free to gift your net salary to whoever you want and they can invest it, gamble it or drink it as they see fit.

HappyHarry

robj4132 said:

Hello - we are unmarried couple cohabitating for over 25 years years with a grown up son, we own the house mortgage free, and have a solicitors-created mirror's will leaving 50/50 to each other, or our son. I am a 40% tax payer with regular net pay approx £4,000 per month, my partner is retired and doesn't work. I do not submit a self-assessment.  I have a defined benefit pension, but am not yet retired. We have a joint current account.
For the last 20 years I have been giving my partner approx £3000 per month, to invest in savings to avoid me paying 40% on my savings - she has multiple savings accounts, and stays below the £12,500 tax band with interest earned. She does not have another income.
Is this legal - for me to gift my partner £36,000 per year to invest ? Should we declare this somewhere ? We are planning to get married this year - will this have an impact ? Having read about a limit of £3000 per year as a non-taxable gift, I am not panicking that I may owe years of unpaid tax on what would have been my interest.
I'm of the opinion we are not doing anything wrong - and have done this out of innocence, plus I have already been taxed at source in my salary.
Any thoughts or examples or guidance is much appreciated. thank you

Yes it is legal.

No, there is no tax to pay on any gifts.

Though there may be future inheritance tax if you are not married, the gifts will likely be exempt as "regular gifts from income" anyway.

robj4132

born_again said:

Do you personally have any ISA's?
£20K a year.

Thank you...yes I do - and I use the ISA allowance each year

Albermarle

You can give as much money as you like, to who you like. There are only two significant implications.
The first is obvious in that once you have gifted money to anyone, it is theirs to do what they want with it.
Second is that if you died in the 7 years following making the gift, and your assets were large enough to be liable for inheritance tax , then the gifts would be counted back into your estate . Although £3K pa of gifts are exempt.
Similarly if you needed care the council would count gifts back in when seeing if your were eligible for council funded care.
When you are married even this issue will disappear.

Maybe more of an issue is that between you, you seem to have a lot of cash savings. This can be a problem as inflation eats away at the value. Maybe you should consider investing some of it.
As a 40% taxpayer you should normally be making maximum advantage of 40% tax relief on pension contributions. If you are not already doing so of course. If your work pension is a DB one and it is not possible to add more,  you could consider opening up a DC pension and investing in that with the bonus of tax relief. 
There is a savings and investments forum and a pension one, if you want to ask any related questions.

p00hsticks

There's no tax on gifts in this country - it's perfectly legal to give away as much as you want, although as it is a gift you do not have any rights to get the money back if the recipient decided to up and leave you.  

The £3000 a year limit you have read about is to do with inheritance tax - anything you give away above that limit effectively remains part of your estate should you die within seven years of making the gift (this is a rule to avoid people simply giving away all their possessions on their death beds). 

As born-again has pointed out, an ISA would enable you to shelter £20k a year from tax without giving it away.

robj4132

Thank you all for your immediate & informative replies - that is a huge relief to know. What a great group of people.

Keep_pedalling

Do either of you have more than £325k in assets? If the answer is yes then you may very well have a IHT issue on the first death, as you don’t have spousal exemption. You also don’t have the ability to transfer any unused NRB to the surviving partner. 

If the above applies to you than it would be wise to marry or form a civil partnership.

SiliconChip

HappyHarry said:

robj4132 said:

Hello - we are unmarried couple cohabitating for over 25 years years with a grown up son, we own the house mortgage free, and have a solicitors-created mirror's will leaving 50/50 to each other, or our son. I am a 40% tax payer with regular net pay approx £4,000 per month, my partner is retired and doesn't work. I do not submit a self-assessment.  I have a defined benefit pension, but am not yet retired. We have a joint current account.
For the last 20 years I have been giving my partner approx £3000 per month, to invest in savings to avoid me paying 40% on my savings - she has multiple savings accounts, and stays below the £12,500 tax band with interest earned. She does not have another income.
Is this legal - for me to gift my partner £36,000 per year to invest ? Should we declare this somewhere ? We are planning to get married this year - will this have an impact ? Having read about a limit of £3000 per year as a non-taxable gift, I am not panicking that I may owe years of unpaid tax on what would have been my interest.
I'm of the opinion we are not doing anything wrong - and have done this out of innocence, plus I have already been taxed at source in my salary.
Any thoughts or examples or guidance is much appreciated. thank you

Though there may be future inheritance tax if you are not married, the gifts will likely be exempt as "regular gifts from income" anyway.

This may or may not be applicable, you've missed a key word from the description, it's actually "regular gifts from surplus income", and we don't know whether the OP and HMRC would agree on whether what has been gifted is surplus. I think the relevant manual is this one.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14255

Keep_pedalling

With £3000 being “invested” a month for 20 years and it seems none of it going into pensions, plus a share of the house the OPs partner must be heavily into IHT territory and they probably are as well. Marriage / civil partnership, new wills, LPAs (if not already in place)  and some professions financial advice would be my priorities in the OPs shoes.