Tax on gifts

Jeremy535897

Keep_pedalling said:

Jeremy535897 said:

Albermarle said:

spdavies said:

Sorry if i've not been clear. 
- Intention is for my Dad to give a me and sister a £10k gift.
- Whilst there is no tax on gifts, i worry that it may fall into the 7year rule if he was to sadly pass in that timeframe and that there may be some subsequent tax obligation. I take your point that this will not be his problem and will just be subsequently deducted from his estate (on 7yr sliding scale).

I am basically asking what the best way is for him to give me and my sister £10k whilst minimising any potential tax implications (gift, capital or IHT).

Thanks

The issue is that if he died within 7 years of making a large gift, the gift would still be counted as part of his estate.
However it would not be a worse position than if he had not made the gift. You can not actually incur more IHT by giving gifts.

You can give more modest gifts each year that are exempt and will not be counted back in the estate, whenever he dies.
That is £3K per year + some smaller amounts for birthdays etc. If the £3K has not been given one year it can be rolled over.
So this tax year he can give away £6K + some birthday money ( £250??) and next tax year £3K + £250? and all will be ignored for IHT calculation purposes when he dies.

You cannot use the annual exemption and small gifts exemption in respect of gifts to the same person.
The simple fact is that father is never going to make gifts that are sufficient in size to make any difference. If he dies within 7 years of making them, then inheritance tax on the estate will be calculated as if the gifts had not been made (although available annual exemptions will be taken into account). I assume that OP's parents were divorced, so there are no transferable nil rate bands?

The OPs father is a widower.

For some reason your posts and OP's reply didn't show up before (Albemarle's was the last one).

MikeJXE

From the horses mouth.

I’m 83 widower and in good health and probably now worth 80 grand

In 2019 i had 140 grand and knew I would be unlikely to need all that so 

Christmas 2019 I gave 60,000 away to my 6 kids and grandkids 

The expression on their faces was priceless 

Do I worry about it, do my kids ?

Thats a definite NO 

Albermarle

Jeremy535897 said:

Albermarle said:

spdavies said:

Sorry if i've not been clear. 
- Intention is for my Dad to give a me and sister a £10k gift.
- Whilst there is no tax on gifts, i worry that it may fall into the 7year rule if he was to sadly pass in that timeframe and that there may be some subsequent tax obligation. I take your point that this will not be his problem and will just be subsequently deducted from his estate (on 7yr sliding scale).

I am basically asking what the best way is for him to give me and my sister £10k whilst minimising any potential tax implications (gift, capital or IHT).

Thanks

The issue is that if he died within 7 years of making a large gift, the gift would still be counted as part of his estate.
However it would not be a worse position than if he had not made the gift. You can not actually incur more IHT by giving gifts.

You can give more modest gifts each year that are exempt and will not be counted back in the estate, whenever he dies.
That is £3K per year + some smaller amounts for birthdays etc. If the £3K has not been given one year it can be rolled over.
So this tax year he can give away £6K + some birthday money ( £250??) and next tax year £3K + £250? and all will be ignored for IHT calculation purposes when he dies.

You cannot use the annual exemption and small gifts exemption in respect of gifts to the same person.
The simple fact is that father is never going to make gifts that are sufficient in size to make any difference. If he dies within 7 years of making them, then inheritance tax on the estate will be calculated as if the gifts had not been made (although available annual exemptions will be taken into account). I assume that OP's parents were divorced, so there are no transferable nil rate bands?

You cannot use the annual exemption and small gifts exemption in respect of gifts to the same person.
Thanks for the clarification.

he simple fact is that father is never going to make gifts that are sufficient in size to make any difference.

He only wants to give away £20K . So £6K this year and £3k next tax year will be exempt, so that is nearly half of it covered.