taxation on gifts

Nimbus

I only work a few hours a week, partly employed, partly self-employed and therefore currently pay no tax. If I am lucky enough to be offered a financial gift from a relative, is this liable to tax? I am confused! It seems that a £3,000 gift may be an annual threshold for non taxation but I am not sure. Any help appreciated - the Inland Revenue helpline has given me 2 different answers!

fengirl_2

No affect on you in receiving gifts. Your relative has an annual £3k exemption on gifts which means IHT is not affected if s/he dies within 7 yrs.

Nimbus

Thank you, this is the first time I have done this and it works really well!

Sorry to be daft, but is this all to do with the giver rather than the receiver then? It sounds like (in a dream world!) I could get as many financial gifts as I want without being liable for tax? And as long as the giver lives for 7 years, there is no liabilty with regard to their estate?

CLAPTON

there is no gift tax in the UK ... you can be given millions by people without you being liable to taxation

however there is inheritance tax.

when someone dies their estate at the time of death and all the (non exempt ) gifts make over the previous 7 years form their estate for IHT purposes.
if this amount is greater that the then IHT allowance them the estate is liable to tax on the excess.

normally this is paid directly from the estate but it depends upon what the will says

Nimbus

Thanks. The Inland Revenue helpline is very misleading - they told me I could only have £3,000 without being taxed and then another call-back from the helpline told me I could only have a financial gift that was non taxable if I was under 16!

CLAPTON

Its best to read the HMRC site for full details but for IHT purposes the following gifts are exempt for the dead persons estate

3000 per year
and individual gifts of 250 each
plus some gifts at the time of offsprings' marriage
gifts from 'ordinary' spending (i.e. not savings )
plus I'm sure afew more

but of course if the person lives for 7 years it doesn't matter
and of course even if they do their estate plus the 7 years gifts may be less than the IHT allowance
and of course their will may (usually) say all debs and taxes to be paid directly from the estate

fengirl_2

And to add to what Clapton says, the liability to IHT is never on the donee, always the donor (or his estate).

Dr_Baird

I hope it's okay to pose my question here as I can't seem to me able to start a separate thread. I gifted a friend a very large sum 4 years ago. At the time I was told I needed to give them a letter saying any IHT would come from my estate in the event that I died within 7 years. I never wrote that letter but is it okay to write it now or did I have to do it at the time?
Many thanks.

localhero

fengirl wrote:

And to add to what Clapton says, the liability to IHT is never on the donee, always the donor (or his estate).

Fengirl, where a lifetime gift exceeds the donor's nil rate band, IHT will be payable by the recipient if the donor dies within 7 years.

Dr Baird, you should state in your Will that your estate is to bear the IHT of any lifetime gifts made by you.

Dr_Baird

Thanks,
I've meant to write a will for years now and will check out the Willwriters' site

CLAPTON

many wills start by saying something like... after debts and taxes have been paid i leave......
this is normally sufficient to make clear that any IHT is to be paid from the estate