Normal expenditure out of income.

greenhoppo1066

Hi. I want to start giving my daughter money from my income each month to help with living casts but know there are rules and regulation on this so wonder if anyone could answer some of my questions.
 • can I give regular amounts of money to my daughters out of money I have earned and paid tax’s on. 

• what is considered income.
ie money I earn from renting out my property and my private pensions that I pay tax’s on, would these be acceptable. 

• is there a limit to how much you can give away. 

• will they need to pay anything on the money I give them. 

• do I have to keep records of the money I give to them. 

• can I still give away the £3000 to them each year from the gift allowance. 

Thank you. 

masonic

If it is excess money from income (i.e. your income exceeds all of your normal living costs by this amount), then you can make regular gifts from this without it being considered for IHT when you die. This is in addition to the £3k per tax year allowance.

If your estate will be below the threshold anyway then it wouldn't make any difference and you can gift whatever you like without any risk of IHT.

It is sensible to keep records to help your executor.

The other thing to consider is deprivation of assets, so you should avoid giving away money you might reasonably have anticipated needing for care costs later in life. Your local authority might limit the financial support they give you should they find evidence of this.

slinger2

I've been looking into this a bit recently since I've been giving a niece a bit of money recently and I'm not expecting to live another 7 years. Smallish amounts really, just a few thousand per year.

See https://www.gov.uk/government/publications/inheritance-tax-gifts-and-other-transfers-of-value-iht403

The document linked there (page 8) indicates the numbers your executor will have to fill in. Quite how they'll do that without the person making detailed records before they die, I wouldn't know. And what evidence/accuracy will be required? No idea.

masonic

Looks like a lot of work. Presumably in practice some attempt to piece this together using bank statements would be needed. Which may get you only so far. I doubt many people keep detailed records of all of their income with this purpose in mind.

Keep_pedalling

There is no gift tax in the UK you can give away as much as you like. There is also no gift allowance of £3k but there is an annual exemption of £3k for IHT purposes. Gifts over this amount are subject to the 7 year rule but if you have excess income (income exceeding expenditure) that can also be gifted exempt from IHT.

If your estate is in IHT territory it may be worth using this exemption but to make it simple for your executors you need to keep good records of both gifts and your expenditure.  

dales1

Looks like a lot of work. Presumably in practice some attempt to piece this together using bank statements would be needed. Which may get you only so far. I doubt many people keep detailed records of all of their income with this purpose in mind.

I have been doing this IHT403 for years, so my executor will have an easier time.

(I have also left my full workings).

For him to do it after I'm gone would not be easy.

enthusiasticsaver

If it is out of taxed income then there is no limit. Income would be pensions/salary, rent from property. Executors would need to see the gifts are excess income rather than from savings/investments. 
There is no tax to pay by beneficiaries. 
Yes  you should really keep records and maybe do an annual letter to say this money is gifted from excess income. 
You can still gift £3k out of savings etc. 

slinger2

enthusiasticsaver said:

If it is out of taxed income then there is no limit. Income would be pensions/salary, rent from property. Executors would need to see the gifts are excess income rather than from savings/investments. 
There is no tax to pay by beneficiaries. 
Yes  you should really keep records and maybe do an annual letter to say this money is gifted from excess income. 
You can still gift £3k out of savings etc. 

Per IHT403 page 8, income includes "Interest (including PEPs and ISAs)". So although the gifts can't be from savings/investments they can be from the income (interest) generated from those savings/investments.

greenhoppo1066

Hi. Thank you for the great advice, it make feel more confident about helping my daughter with living cost, all the money I give them would be from the property I rent out and my private pensions which I pay tax on and i have money in Savings, Isa and property should I need any care in later life, I know I’m under the IHT limit now but it might not be the case in 10 years time so will fill in IHT403 forms each year and leave letter gifting money out of income for them. 

Thank you. 

slinger2

If you live 7 years after the gift it won't matter anyway. Of course that's difficult to predict.

poseidon1

slinger2 said:

enthusiasticsaver said:

If it is out of taxed income then there is no limit. Income would be pensions/salary, rent from property. Executors would need to see the gifts are excess income rather than from savings/investments. 
There is no tax to pay by beneficiaries. 
Yes  you should really keep records and maybe do an annual letter to say this money is gifted from excess income. 
You can still gift £3k out of savings etc. 

Per IHT403 page 8, income includes "Interest (including PEPs and ISAs)". So although the gifts can't be from savings/investments they can be from the income (interest) generated from those savings/investments.

But not if ISA income is accumulated  ( within the ISA ) rather than paid out to the investor each year.