Rules on Gifting Money

roadweary
roadweary Posts: 219 Forumite
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in Deaths, funerals & probate
Hi,

My father passed away last October and my mother is 84 years old.

She wants to give money to each of her grandchildren but is confused as to the rules about how much she is allowed to give.

She would like to give £2000 each to 5 grandchildren.

I have read around but am not entirely clear.

I *think* what the rules are saying is:

The total amount she can give away per tax year, tax free is £3000.

If she gave away £10,000 and died within 7 years, then at that point the £10,000 that was given away would be added to the value of the estate, and inheritance tax would be calculated on the entire estate.

In other words, there is no tax now, but only if she passes away, as part of the inheritance tax on her estate, and then dependent on when; within 3 years - fully taxable, 3-7 years - taper relief, over 7 years - no tax implications.

Is that correct?

She would prefer to give all the gifts in one go...and she's asked me to look into it for her.

Any advice gratefully received.

Thanks,
R

Comments

  • xylophone
    xylophone Posts: 44,287 Forumite
    Name Dropper First Anniversary First Post
    https://www.gov.uk/inheritance-tax/gifts

    Is your mother's estate of a size that IHT will be payable?

    Any transferable nil rate band?

    Family home allowance?

    https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

    And re "taper relief" which applies only on gifts after the Nil Rate Band has been used up see

    https://www.telegraph.co.uk/tax/inheritance/inheritance-tax-happens-make-gift-die-within-seven-years/
  • Keep_pedalling
    Keep_pedalling Posts: 16,561 Forumite
    First Anniversary First Post Name Dropper Photogenic
    This is only really of concern if her estate is in excess of her nil rate band and the transferable nil rate band from her husband, which assuming she inherited all of her husband’s estate is £650,000. If she owns a house then we are talking £950,000 (rising to £1M next April).
  • roadweary
    roadweary Posts: 219 Forumite
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    Keep_pedalling wrote: »
    This is only really of concern if her estate is in excess of her nil rate band and the transferable nil rate band from her husband, which assuming she inherited all of her husband’s estate is £650,000. If she owns a house then we are talking £950,000 (rising to £1M next April).

    Ah, hadn't realised that. The estate would not exceed £650,000 so I think she is free to do with her money as she chooses?

    Most of the money is in the house.....and it's hypothetical due to the total value of her estate....but you are saying that there is an extra £300,000 nil rate allowance for property?

    Thanks,
    R
  • Keep_pedalling
    Keep_pedalling Posts: 16,561 Forumite
    First Anniversary First Post Name Dropper Photogenic
    roadweary wrote: »
    Ah, hadn't realised that. The estate would not exceed £650,000 so I think she is free to do with her money as she chooses?

    Most of the money is in the house.....and it's hypothetical due to the total value of her estate....but you are saying that there is an extra £300,000 nil rate allowance for property?

    Thanks,
    R

    Even if her estate was in IHT territory she would still be free to gift what she liked, is just that the remaining estate would pay IHT on PET gifts they where still within 7 years.

    What she does need to be careful of is leaving herself asset rich and cash poor. Owning a house that you don’t have available to par for majors repairs when they occur is not a good position to be in. I know som of my elderly neighbours who are sitting on a small fortune but live like paupers.
  • xylophone
    xylophone Posts: 44,287 Forumite
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    but you are saying that there is an extra £300,000 nil rate allowance for property?

    Read link in my post above for when this applies.
  • Tom99
    Tom99 Posts: 5,371 Forumite
    First Post First Anniversary
    As said there is no immediate tax on gifts so she can gift £10,000 now.
    If she did not make any gifts last year that £3,000 can be carried forward so £6,000 would be IHT free with £4,000 a PET.
    There would be no taper relief unless gifts in the last 7yrs were more than £650k since gifts are the 1st thing to eat into the NRB and only when the NRB has been exhausted by gifts does taper relief come into play.
  • roadweary
    roadweary Posts: 219 Forumite
    Name Dropper First Post First Anniversary Combo Breaker
    xylophone wrote: »
    Any transferable nil rate band?

    Family home allowance?

    https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

    Having read that, I'm still not completely clear. Does this mean on top of the 650k of nil rate that she has, she also has 150k from my dad, and 150k of her own nil rate on the sale of the house?

    Thanks,
    R
  • roadweary
    roadweary Posts: 219 Forumite
    Name Dropper First Post First Anniversary Combo Breaker
    Keep_pedalling wrote: »
    Even if her estate was in IHT territory she would still be free to gift what she liked, is just that the remaining estate would pay IHT on PET gifts they where still within 7 years.

    What she does need to be careful of is leaving herself asset rich and cash poor. Owning a house that you don’t have available to par for majors repairs when they occur is not a good position to be in. I know som of my elderly neighbours who are sitting on a small fortune but live like paupers.

    Hi,

    Yes, that makes absolute sense and I am keeping an eye on that for her.

    Thanks,
    R
  • Keep_pedalling
    Keep_pedalling Posts: 16,561 Forumite
    First Anniversary First Post Name Dropper Photogenic
    roadweary wrote: »
    Having read that, I'm still not completely clear. Does this mean on top of the 650k of nil rate that she has, she also has 150k from my dad, and 150k of her own nil rate on the sale of the house?

    Thanks,
    R

    Yes providing the house is worth £300k or more and is left to direct descendants.. This also applies if the house is sold to downsize, or move into sheltered accommodation or care home before the testator dies.
  • Dox
    Dox Posts: 3,116 Forumite
    First Anniversary Name Dropper First Post
    roadweary wrote: »
    She wants to give money to each of her grandchildren but is confused as to the rules about how much she is allowed to give.

    She can give whatever she wants/can afford to give. Don't let the tax implications (which may be nil, but given the sums involved won't be very great in any case) take precedence over her desire to help her grandchildren now rather than later.
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