Christmas and birthday gifts and IHT

aggieboy_2

Hello all.

I'd like some clarification over this statement from the government website, please - 
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

What is the definition of 'regular income' and do I need to/how do I prove it's regular income?

My thoughts are to start giving my three children money from my current account each birthday and Christmas under this provision.

To put some meat on the bones I currently and historically save money from pensions and then put into either ISAs, Premium bonds and a fixed savings account. I currently have 16k in my current account that has just built up over the last year once all my outgoings have been taken. Can I split that money between them as per their statement? 
Thanks. 

Keep_pedalling

Giving that much away is not going to fall within the birthday, Christmas gifting exemption which is a bit of a grey area. Look instead to make gifts from your excess income exemption which you can claim on top of your annual £3000 exemption. For your executors to be able to claim this exemption without trawling through 7 years of bank statements you need to keep records of both your gifting and your expenditure. 

Have a look at page 8 of IHT 403 to see what you need to record. 

https://assets.publishing.service.gov.uk/media/5f60b44cd3bf7f7234487bf0/IHT403-05-20.pdf

Grumpy_chap

Keep_pedalling said:

Giving that much away is not going to fall within the birthday, Christmas gifting exemption which is a bit of a grey area. Look instead to make gifts from your excess income exemption 

Aren't the Christmas / Birthday gifts just a form of gifting from excess income?

aggieboy_2 said:

Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

Albermarle

aggieboy_2 said:

Hello all.

I'd like some clarification over this statement from the government website, please - 
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

What is the definition of 'regular income' and do I need to/how do I prove it's regular income?

My thoughts are to start giving my three children money from my current account each birthday and Christmas under this provision.

To put some meat on the bones I currently and historically save money from pensions and then put into either ISAs, Premium bonds and a fixed savings account. I currently have 16k in my current account that has just built up over the last year once all my outgoings have been taken. Can I split that money between them as per their statement? 
Thanks. 

Will you likely to be actually liable for IHT when you die? Or if you are a married couple when the second one dies.
Otherwise I think to make gifts out of regular income, it is better to make them regularly.
It is a bit if a grey area and HMRC can take a view in each situation AFAIK.
I would also suspect it is one of those IHT avoidance strategies that will be closed off at some point.

scoobyjones1

HMRC don't like this in my experience. My accountant would not do this for my Dad.
You have to show that it does not affect your own wealth, that you have more than enough, regular income. So if your bank balance dropped by £16k they would not allow it. Are you likely to be hit for IHT? If you are married and will leave your home to your kids you can have an estate of £1m before IHT is a thing?

aggieboy_2

Albermarle said:

aggieboy_2 said:

Hello all.

I'd like some clarification over this statement from the government website, please - 
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

What is the definition of 'regular income' and do I need to/how do I prove it's regular income?

My thoughts are to start giving my three children money from my current account each birthday and Christmas under this provision.

To put some meat on the bones I currently and historically save money from pensions and then put into either ISAs, Premium bonds and a fixed savings account. I currently have 16k in my current account that has just built up over the last year once all my outgoings have been taken. Can I split that money between them as per their statement? 
Thanks. 

Will you likely to be actually liable for IHT when you die? Or if you are a married couple when the second one dies.
Otherwise I think to make gifts out of regular income, it is better to make them regularly.
It is a bit if a grey area and HMRC can take a view in each situation AFAIK.
I would also suspect it is one of those IHT avoidance strategies that will be closed off at some point.

Yes, as things stand and probably more than likely after the next Labour budget 🙄  I'm married and my home is currently worth circa £1m so, as I understand it, my savings etc will come into play. 

aggieboy_2

aggieboy_2 said:

Hello all.

I'd like some clarification over this statement from the government website, please - 
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

What is the definition of 'regular income' and do I need to/how do I prove it's regular income?

My thoughts are to start giving my three children money from my current account each birthday and Christmas under this provision.

To put some meat on the bones I currently and historically save money from pensions and then put into either ISAs, Premium bonds and a fixed savings account. I currently have 16k in my current account that has just built up over the last year once all my outgoings have been taken. Can I split that money between them as per their statement? 
Thanks. 

I didn't expect it would be an inheritance tax panacea but just thought there may be some clarification or even a stated case covering this statement and it's implications. We all know that some people get expensive watches, jewelry even cars as gifts for Christmas or birthdays, are they just gambling on not dying within 7 years? 

Albermarle

aggieboy_2 said:

aggieboy_2 said:

Hello all.

I'd like some clarification over this statement from the government website, please - 
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

What is the definition of 'regular income' and do I need to/how do I prove it's regular income?

My thoughts are to start giving my three children money from my current account each birthday and Christmas under this provision.

To put some meat on the bones I currently and historically save money from pensions and then put into either ISAs, Premium bonds and a fixed savings account. I currently have 16k in my current account that has just built up over the last year once all my outgoings have been taken. Can I split that money between them as per their statement? 
Thanks. 

I didn't expect it would be an inheritance tax panacea but just thought there may be some clarification or even a stated case covering this statement and it's implications. We all know that some people get expensive watches, jewelry even cars as gifts for Christmas or birthdays, are they just gambling on not dying within 7 years? 

You can give away £3K each tax year ( That is £6K for you and your spouse if you have one ) without any issues.

aggieboy_2

scoobyjones1 said:

HMRC don't like this in my experience. My accountant would not do this for my Dad.
You have to show that it does not affect your own wealth, that you have more than enough, regular income. So if your bank balance dropped by £16k they would not allow it. Are you likely to be hit for IHT? If you are married and will leave your home to your kids you can have an estate of £1m before IHT is a thing?

My home is currently circa £1m+. So my savings and my investments come into play. Tbh giving that away wouldn't affect me at all. It's just extra that I'd normally get an ISA etc with. I plan on using my £3k + last years £3k too. 

aggieboy_2

Albermarle said:

aggieboy_2 said:

aggieboy_2 said:

Hello all.

I'd like some clarification over this statement from the government website, please - 
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

What is the definition of 'regular income' and do I need to/how do I prove it's regular income?

My thoughts are to start giving my three children money from my current account each birthday and Christmas under this provision.

To put some meat on the bones I currently and historically save money from pensions and then put into either ISAs, Premium bonds and a fixed savings account. I currently have 16k in my current account that has just built up over the last year once all my outgoings have been taken. Can I split that money between them as per their statement? 
Thanks. 

I didn't expect it would be an inheritance tax panacea but just thought there may be some clarification or even a stated case covering this statement and it's implications. We all know that some people get expensive watches, jewelry even cars as gifts for Christmas or birthdays, are they just gambling on not dying within 7 years? 

You can give away £3K each tax year ( That is £6K for you and your spouse if you have one ) without any issues.

Yes, I plan to use this year's £3k + last year's too.