IHT403 Gifting from income

hkymre

I’m looking to reduce future IHT exposure & wanted to confirm that I’ve understood things properly 

I’m drawing down from my pension & also have a little income from premium bonds and savings

Currently I’m gifting my daughter £3000 a year via a monthly standing order
I believe I can increase this as I have excess income & document it via the IHT403

My main confusion is around holidays & bigger house expenditure. These are mostly paid for via savings. The savings pots are topped up with excess income.
Does this complicate matters in anyway?

Secondly my wife isn’t yet drawing her pension.
She has income from savings & premium bonds & I transfer money to her for household bills.
Her excess income comes from larger than normal PB wins
Am I right in assuming as it’s not a regular amount it’s unlikely she can make gifts from income?

Linton

Money held as savings is savings and so not available for Gifts From Income.  Money from income held in say a current account becomes savings after 2 years.  So you need a clear link between the income and the GFI.

You should be able to demonstrate that the GFI forms part of a regular pattern.

So for both reasons it would seem that the holiday and house expenditure gifts are not GFI.

I would agree that your wife's gifts from large PB wins are not GFI. Though presumably they could be covered by the £3K allowance. 

PS you say you have income from savings.  That could make your claim for GFI awkward.

Brie

Is IHT actually going to be an issue?  it isn't for most people.  

And does your wife have a pension that she's paying into regularly?  I would consider that a priority over gifting money to kids.  

Keep_pedalling

hkymre said:

I’m looking to reduce future IHT exposure & wanted to confirm that I’ve understood things properly 

I’m drawing down from my pension & also have a little income from premium bonds and savings

Currently I’m gifting my daughter £3000 a year via a monthly standing order
I believe I can increase this as I have excess income & document it via the IHT403

My main confusion is around holidays & bigger house expenditure. These are mostly paid for via savings. The savings pots are topped up with excess income.
Does this complicate matters in anyway?

Secondly my wife isn’t yet drawing her pension.
She has income from savings & premium bonds & I transfer money to her for household bills.
Her excess income comes from larger than normal PB wins
Am I right in assuming as it’s not a regular amount it’s unlikely she can make gifts from income?

Holidays and household bills are expenditure from income not savings. Is you wife not making use gift of her £3000 annual exemption? 

Is your joint net worth already in IHT territory? If it is gifts from excess income is not going to help very much, you should be looking at larger one of gifts as well.

hkymre

Linton said:

Money held as savings is savings and so not available for Gifts From Income.  Money from income held in say a current account becomes savings after 2 years.  So you need a clear link between the income and the GFI.

You should be able to demonstrate that the GFI forms part of a regular pattern.

So for both reasons it would seem that the holiday and house expenditure gifts are not GFI.

I would agree that your wife's gifts from large PB wins are not GFI. Though presumably they could be covered by the £3K allowance. 

PS you say you have income from savings.  That could make your claim for GFI awkward.

Thanks.
for clarity the holiday & housing expenditure is for myself & wife, not a gift
The savings income is just interest from savings accounts

Brie said:

Is IHT actually going to be an issue?  it isn't for most people.  

And does your wife have a pension that she's paying into regularly?  I would consider that a priority over gifting money to kids.  

With the pension, our house & savings we have around £2m so iht will potentially be an issue
My wife isnt currently paying into a pension

silvercar

hkymre said:

Linton said:

Money held as savings is savings and so not available for Gifts From Income.  Money from income held in say a current account becomes savings after 2 years.  So you need a clear link between the income and the GFI.

You should be able to demonstrate that the GFI forms part of a regular pattern.

So for both reasons it would seem that the holiday and house expenditure gifts are not GFI.

I would agree that your wife's gifts from large PB wins are not GFI. Though presumably they could be covered by the £3K allowance. 

PS you say you have income from savings.  That could make your claim for GFI awkward.

Thanks.
for clarity the holiday & housing expenditure is for myself & wife, not a gift
The savings income is just interest from savings accounts

Brie said:

Is IHT actually going to be an issue?  it isn't for most people.  

And does your wife have a pension that she's paying into regularly?  I would consider that a priority over gifting money to kids.  

With the pension, our house & savings we have around £2m so iht will potentially be an issue
My wife isnt currently paying into a pension

So the question is whether you can pay for your own holidays from savings and still have excess income to gift with?

Keep_pedalling

hkymre said:

Linton said:

Money held as savings is savings and so not available for Gifts From Income.  Money from income held in say a current account becomes savings after 2 years.  So you need a clear link between the income and the GFI.

You should be able to demonstrate that the GFI forms part of a regular pattern.

So for both reasons it would seem that the holiday and house expenditure gifts are not GFI.

I would agree that your wife's gifts from large PB wins are not GFI. Though presumably they could be covered by the £3K allowance. 

PS you say you have income from savings.  That could make your claim for GFI awkward.

Thanks.
for clarity the holiday & housing expenditure is for myself & wife, not a gift
The savings income is just interest from savings accounts

This is what I thought you meant, but I still think annual holidays and most items need to be deducted from income to calculate your e cessations income.

Brie said:

Is IHT actually going to be an issue?  it isn't for most people.  

And does your wife have a pension that she's paying into regularly?  I would consider that a priority over gifting money to kids.  

With the pension, our house & savings we have around £2m so iht will potentially be an issue
My wife isnt currently paying into a pension

Sounds like it may be time to look at larger gifts from savings. 

hkymre

Thanks for all the advice

I assume the larger gifts from savings come under PET. I’ll look into that further
And in the meantime I’ll increase the standing order under GFI and start logging it properly