retirement gifting from excess income

Nelehtheelephant

My husband took early retirement in 2015 and I left my part-time job later that year with no pension payments. My husband became a higher rate tax payer in 2024.We have 2 joint bank current accounts. Both were previously our individual bank accounts on marriage. Throughout our marriage his salary and pension has been paid into his former account, and my salary and (now state pension & a small DB pension) has been paid into my former bank account.

We have always shared our finances completely, but his salary/pension has always far exceeded my income. As a 20% tax payer we did the bulk of our taxable savings in my name, and saved into individual ISA's.

My husband now wishes to establish regular gifts from excess income. Because I have saved the excess income monthly previously into my savings accounts as a previous non tax payer 2015-2025, but now tax payer in 26/27, and then fed back to his/our current account to pay the credit card bill each month, does that mean that HRMC would view this gifting from savings? I see from other sources that now I receive my pensions that our household expenses need to be split 50/50, which is fine for running the house, but my income would not cover the share for holidays, so are unsure how this would be viewed by HMRC?

Any advice would be welcomed.

Keep_pedalling

Gifting from excess income gets complicated when it comes from a married person who brings in the bulk of the household income. My take on this is that if your income is insufficient to cover 50% of household expenditure then that shortfall reduces his excess income. So for example a couple with net incomes of £60k and £20k and annual expenditure of £60 then the one earning £60k will be contributing £40k to annual expenditure.

Gifts should be made from a sole account in his name and it is probably best if he makes monthly gifts to establish a pattern of regular gifting quickly. He will need to keep a very good record of expenditure otherwise his executors are going to have difficulty in claiming this exemption. Have a look at page 8 of IHT403 to see what records he is going to have to keep.

https://assets.publishing.service.gov.uk/media/69c6934978ca1aa5a63609d9/IHT403-04-26.pdf

sheenas

maybe I have missed something. Gifting money from husband to wife is tax free.

sheramber

https://forums.moneysavingexpert.com/discussion/6668533/retirement-gifting-from-excess-income

Are you talking about gifting to third parties such as children, or are you asking if the money you transfer to the current account/ to be used for household expenses I assume- is counted as gifting?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82000888#Comment_82000888

Maybe it is a question about when does income stop having the character of income? There is something about 2 years mentioned somewhere. That is income loses its income character after it has been accumulated for two years.

So husband has excess income of say £10k in 24/5 and gives that £10k to wife in 24/5. Wife puts it in her savings account but then uses some of that £10k to pay the credit card in 26/7 by transferring it from savings to current account. Is that money still income - it is about 2 years since it was saved. Personally I think it stopped being income when it was given away by the husband to the wife.

For the OP I think you need to look at expenditure in a year and income in a year (on an individual basis) to decide if either of you have excess income. If one spouse can't afford their half of joint expenses then the excess is an expense of the other spouse. I would ignore where you got the money to pay the expenditure. But I am probably over simplifying things.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82000839#Comment_82000839

I had rather assumed that this was about gifting to others and the OP was simply worried about the gifts coming from her account. Clarification needed.