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Clever gifting out of excess income or not?
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Madeinireland101
Posts: 201 Forumite
in Cutting tax
If…
1. I have £200k and I loan it to my kids over a five year period - £20k per year each and there are two kids.
1. I have £200k and I loan it to my kids over a five year period - £20k per year each and there are two kids.
2. They earn £10k per year by putting it in ISA’s by the end of 5 years.
3. I can at any time get the money back if I need it for any reason.
3. I can at any time get the money back if I need it for any reason.
Although I haven’t gifted the money and it’s still in my estate I am now in the position where they are earning £10k per year out of my excess income with little risk to me running out of money and not having to go through all the effort of recording income and expenditure.
Thoughts please?
Thoughts please?
0
Comments
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Do you not get bored inventing these scenarios?2
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My thought is that it is a non starter. You are making an interest free loan and any interest they make on it is their income not yours.1
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Who says the kids will give the money back?
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⭐️🏅😇1 -
Although I haven’t gifted the money and it’s still in my estate
How so?
Money in a ISA is theirs. As it is under their name.
Maybe HMRC would have a view on this.Life in the slow lane1 -
they don't have to give the money back - if you insisted on this, then they could reasonably decide that they want to use their ISA allowances for their own money
do you have 200K excess income per year?0 -
My thought is that HMRC will find out and want to know why you would loan someone money to just put in a savings account and not make any attempt to make repayments. Effectively this is STILL a gift0
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This is a gift and loan scheme and not uncommon. It often involves a trust but I can’t see any reason why you can’t loan the funds to your children directly.As it is a loan, the capital will remain as part of your estate, but the income or growth that your children make on your capital never belongs to you and so is exempt from inheritance tax.Not sure what your reference to excess income is about?I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.0
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Not at all - I’m currently preparing to gift from income and realising what a pain it is to document income and expenses as a couple.TheSpectator said:Do you not get bored inventing these scenarios?0 -
That’s the point - I want them to have the interestKeep_pedalling said:My thought is that it is a non starter. You are making an interest free loan and any interest they make on it is their income not yours.0 -
I trust my kids but it’s a formal interest free loan so that could apply with any loan so not sure what your point is.Brie said:Who says the kids will give the money back?0
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