Discussion
Dear all
I wish to give away cash to my kids, as much as I can. I see that you can give away £3k per tax year free of tax. Is that a limit on the giver, or the receiver?
Could I give £3k each per year to several people per tax year or can I only give £3k in total per tax year?
I'm inclined to think it's £3k in total, but if anyone could confirm, I'd be most grateful.
Thanks
I wish to give away cash to my kids, as much as I can. I see that you can give away £3k per tax year free of tax. Is that a limit on the giver, or the receiver?
Could I give £3k each per year to several people per tax year or can I only give £3k in total per tax year?
I'm inclined to think it's £3k in total, but if anyone could confirm, I'd be most grateful.
Thanks
It is £3K in total:
https://www.gov.uk/inheritance-tax/gifts
However you need to put it in context. You can give away as much as you like (cash) and you will not pay any tax now. You might pay tax (the estate/beneficiaries) if you do not live for 7 years. Read all of the above, to get your head round it.
If you are concerned about paying IHT in the future, you need to get advice now.
https://www.gov.uk/inheritance-tax/gifts
However you need to put it in context. You can give away as much as you like (cash) and you will not pay any tax now. You might pay tax (the estate/beneficiaries) if you do not live for 7 years. Read all of the above, to get your head round it.
If you are concerned about paying IHT in the future, you need to get advice now.
Also, you can gift a regular income to anyone. If you do this out of your regular income, ie not from savings etc, then it does not fall in to the IHT gift regime and so there's no issue about IHT with such regular payments. The receiver may be subject to income tax on such regular payments...it's their responsibility to sort this out.
If the regular income comes out of savings, then it will be considered a gift under the IHT regime.
Anyway, that's my understanding of things. As always, best to get proper advice before any commitment.
R.
If the regular income comes out of savings, then it will be considered a gift under the IHT regime.
Anyway, that's my understanding of things. As always, best to get proper advice before any commitment.
R.
Joey Deacon said:
randlemarcus said:
You could always develop a dreadful, cash heavy gambling habit 
If they put cash in the bank then there is a trail. What about if you bought gold for cash, gave the gold to your children and then at a latter date they sold it?Surely this is pretty much untraceable?
R.
You can give as much as you like. If you have a £1 million to give, give it - but don't die for 7 years.
If you die within 7 years of making the gift, the gift is deemed to be still part of your estate for Inheritance Tax (IHT) purposes, although the value of the amount remaining from the £1 million gift is time apportioned downward for every year you lived between the date of the gift and 7 years. If you make it to 7 years, the gifted amount is permanently removed from the value of your estate at the date of death and will be excluded when carrying out any IHT calculations..
As has been said, you can give up to £3,000 per annum anyway. If you did not make use of the £3,000 allowance in the immediate previous tax year, in the current tax year you can double up the allowance to £6,000.
You can give as much as you like out of your annual income. So, if you have an annual salary of (say) £50,000, if you chose to give away £10,000 in any given year out of that £50,000, that will also not be taxed in any way.
There is also a rather archaic allowance given for gifts "in anticipation of marriage". I expect this was to cover dads funding their daughter's weddings It now covers Civil Partnerships too.
The marriage gift allowances are -
£5,000 to a child.
£2,500 to a grandchild or great-grandchild.
£1,000 to any other person.
And finally, there is a Small Gift Allowance of £250 per annum.
If you die within 7 years of making the gift, the gift is deemed to be still part of your estate for Inheritance Tax (IHT) purposes, although the value of the amount remaining from the £1 million gift is time apportioned downward for every year you lived between the date of the gift and 7 years. If you make it to 7 years, the gifted amount is permanently removed from the value of your estate at the date of death and will be excluded when carrying out any IHT calculations..
As has been said, you can give up to £3,000 per annum anyway. If you did not make use of the £3,000 allowance in the immediate previous tax year, in the current tax year you can double up the allowance to £6,000.
You can give as much as you like out of your annual income. So, if you have an annual salary of (say) £50,000, if you chose to give away £10,000 in any given year out of that £50,000, that will also not be taxed in any way.
There is also a rather archaic allowance given for gifts "in anticipation of marriage". I expect this was to cover dads funding their daughter's weddings
It now covers Civil Partnerships too.The marriage gift allowances are -
£5,000 to a child.
£2,500 to a grandchild or great-grandchild.
£1,000 to any other person.
And finally, there is a Small Gift Allowance of £250 per annum.
Eric Mc said:
You can give as much as you like. If you have a £1 million to give, give it - but don't die for 7 years.
If you die within 7 years of making the gift, the gift is deemed to be still part of your estate for Inheritance Tax (IHT) purposes, although the value of the amount remaining from the £1 million gift is time apportioned downward for every year you lived between the date of the gift and 7 years. If you make it to 7 years, the gifted amount is permanently removed from the value of your estate at the date of death and will be excluded when carrying out any IHT calculations..
As has been said, you can give up to £3,000 per annum anyway. If you did not make use of the £3,000 allowance in the immediate previous tax year, in the current tax year you can double up the allowance to £6,000.
You can give as much as you like out of your annual income. So, if you have an annual salary of (say) £50,000, if you chose to give away £10,000 in any given year out of that £50,000, that will also not be taxed in any way.
There is also a rather archaic allowance given for gifts "in anticipation of marriage". I expect this was to cover dads funding their daughter's weddings It now covers Civil Partnerships too.
The marriage gift allowances are -
£5,000 to a child.
£2,500 to a grandchild or great-grandchild.
£1,000 to any other person.
And finally, there is a Small Gift Allowance of £250 per annum.
If one’s income derives purely from investments can this be regularly gifted tax free, or does it have to be ‘earned’ salary?If you die within 7 years of making the gift, the gift is deemed to be still part of your estate for Inheritance Tax (IHT) purposes, although the value of the amount remaining from the £1 million gift is time apportioned downward for every year you lived between the date of the gift and 7 years. If you make it to 7 years, the gifted amount is permanently removed from the value of your estate at the date of death and will be excluded when carrying out any IHT calculations..
As has been said, you can give up to £3,000 per annum anyway. If you did not make use of the £3,000 allowance in the immediate previous tax year, in the current tax year you can double up the allowance to £6,000.
You can give as much as you like out of your annual income. So, if you have an annual salary of (say) £50,000, if you chose to give away £10,000 in any given year out of that £50,000, that will also not be taxed in any way.
There is also a rather archaic allowance given for gifts "in anticipation of marriage". I expect this was to cover dads funding their daughter's weddings
It now covers Civil Partnerships too.The marriage gift allowances are -
£5,000 to a child.
£2,500 to a grandchild or great-grandchild.
£1,000 to any other person.
And finally, there is a Small Gift Allowance of £250 per annum.
Pippage said:
If one’s income derives purely from investments can this be regularly gifted tax free, or does it have to be ‘earned’ salary?
The test is "income", it doesn't need to be "earned income".So far as I'm aware it doesn't even have to be taxable income, so income arising within and staying inside an ISA appears to qualify for this purpose. Obviously you'd need to find the actual cash for the gift from somewhere else, such as savings.
The gifts out of surplus income rules are fairly complex from what I have seen.
The key words are of course ‘surplus’ and ‘income’.
An individual can gift a portion of their employment income, investment income (taxable or otherwise), rental income, or even their pension income. Be careful here as some retirement plans produce cash income that is actually a return of capital and not technically income for these purposes…
The constraint appears to be that the donor’s residual (by which I mean after tax) income must remain sufficient to support the donor’s lifestyle.
i.e., a well-heeled pensioner could not give away a material percentage of their ‘income’ if they simply replaced this income by tapping into their capital reserves to sustain ‘their lifestyle’….
There are also rules about the basis upon the gifting is arranged be it regular £ amounts, a fixed % of something etc. and if a clear pattern is established by making such gifts regularly, and until death.
A key consideration would be to ensure that there is a good paper trail in place which documents the donor’s intentions. I.e., a letter confirming that £x or X% of this or that income stream be given on this frequency for the foreseeable etc.
Of course, once a gifting plan is in place, I believe that it could be modified from time to time but if it was substantially reduced or turned off, I’m not sure that wouldn’t have consequences…
Underneath all of this is the apparent requirement to file an IHT403 form upon death which basically looks like a P&L statement covering all income and expenditure over the preceding 7 tax years!
This level of forensic detail could present a real challenge to any conscientious executor but I have no idea how common it is in practice for this to ever blow-up into a real issue which might result in HMRC making an adverse assessment with more tax and perhaps penalties to pay…
The key words are of course ‘surplus’ and ‘income’.
An individual can gift a portion of their employment income, investment income (taxable or otherwise), rental income, or even their pension income. Be careful here as some retirement plans produce cash income that is actually a return of capital and not technically income for these purposes…
The constraint appears to be that the donor’s residual (by which I mean after tax) income must remain sufficient to support the donor’s lifestyle.
i.e., a well-heeled pensioner could not give away a material percentage of their ‘income’ if they simply replaced this income by tapping into their capital reserves to sustain ‘their lifestyle’….
There are also rules about the basis upon the gifting is arranged be it regular £ amounts, a fixed % of something etc. and if a clear pattern is established by making such gifts regularly, and until death.
A key consideration would be to ensure that there is a good paper trail in place which documents the donor’s intentions. I.e., a letter confirming that £x or X% of this or that income stream be given on this frequency for the foreseeable etc.
Of course, once a gifting plan is in place, I believe that it could be modified from time to time but if it was substantially reduced or turned off, I’m not sure that wouldn’t have consequences…
Underneath all of this is the apparent requirement to file an IHT403 form upon death which basically looks like a P&L statement covering all income and expenditure over the preceding 7 tax years!
This level of forensic detail could present a real challenge to any conscientious executor but I have no idea how common it is in practice for this to ever blow-up into a real issue which might result in HMRC making an adverse assessment with more tax and perhaps penalties to pay…
Personally I wouldn't be concerned over this gift tax allowance. It's only an issue when you're dead and the 7 years comes into play. The likelihood is you've gifted it to your beneficiaries so they're getting it early. If it was still in you're estate IHT would have to be paid anyway.
Thanks everybody for your input. As some have hinted, it's IHT concerns that has prompted my actions. To be honest I'm a bit peeved that I am having to have such concerns, I'm just an ordinary bloke, a retired tradesman and small business man. By no means a rich individual.
Where I am from has relatively cheap property prices , anyone who owns their own home in the home counties are almost certain to have their estates plundered by Govt when they fall off their perch.
Anyhow, when time allows I am going to get legal advice to see how I can protect my estate for my kids,will cost of course, but should be money well spent.
Thanks again all.
Where I am from has relatively cheap property prices , anyone who owns their own home in the home counties are almost certain to have their estates plundered by Govt when they fall off their perch.
Anyhow, when time allows I am going to get legal advice to see how I can protect my estate for my kids,will cost of course, but should be money well spent.
Thanks again all.
What were you thinking of, putting property in trust, or maybe the effective doubling of IHT Threshold? Hosenbugler said:
when time allows I am going to get legal advice to see how I can protect my estate for my kids, will cost of course, but should be money well spent.
To be honest, this thread has really covered all of the relevant ground so you could save yourself some ££ on fees and charges! The bottom line is that IHT is very avoidable if you "give stuff away" at appropriate times and can drop your estate into the tax free band at death.Setting up trusts and everything that goes with it is really the preserve of the seriously wealthy, for whom £,000s in fees to set it up and £,000s in fees each year to keep it running pale into insignificance compared with the tax saved. And always the problem remains that the government can change the rules at any time.
The big advantage of outright gifts is that once they're made, they're made. Government can't go back and tax them later (subject to 7 year survival).
One point to watch out for with gifting in the context of the IHT threshold is that during the 7 years it's the tax that tapers, not the gift.
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