giving away money
Discussion
my grandad, has good amount in bank, retired professional etc etc, says that you can only 'give away' £3000 a year maybe slightly more if its a wedding exspense but you need receipts. I dont disagree with him but dont like broaching the subject of money with my family. My question is how on earth would anyone (bank, hmrc, gov?) know how much a private individual could withdraw out of his own funds?. I know legislation was introduced so that the banks alerted the authorities if large deposits or withdrawals of cash were noticed to stop criminals benefiting from thier trade, but surely if its your own taxed money its noones business?. what if i wanted to buy a £40,000 car? surely my grandad could ask to withdraw that amount,and buy the car for me , if he gave enough notice to the bank.
Or maybe im going off thread at that, as such a scenario is simply him buying on my behalf. if its a private sale and not from a dealer, then the only indication of said act occuring is a hole in his finances?. would an accountant question this on his death?
Or maybe im going off thread at that, as such a scenario is simply him buying on my behalf. if its a private sale and not from a dealer, then the only indication of said act occuring is a hole in his finances?. would an accountant question this on his death?
Parasite 
Your grandad can give you as much as he likes - with no direct tax implications at all. The key is that he must stay alive for seven years after he has given you the money. If he dies within seven years, the gift he gave you is counted as still being part of the value of his estate for Inheritance Tax Purposes.
Once the seven years have elapsed, it is deemed to be no longer part of his estate and it will be ignored when valuing the estate at the date of his death.
Annual gifts of up to £3,000 are also allowed. If no gift was made last year, then last year's unused amount of £3,000 can be gifted as well, bringing the maximum excluded gift to £6,000.
A further £5,000 can be given away to a son or daughter in consideration of marriage. Grandparents can gift £2,500 and non-relatives £1,000.
Note that gifts above these amounts will not be taxed in any way, unless the person making the gift dies within the magic seven year period - when the amounts gifted will be added into the overall estate of the deceased when valuing it for Inheritance Tax Purposes.
Your grandad can give you as much as he likes - with no direct tax implications at all. The key is that he must stay alive for seven years after he has given you the money. If he dies within seven years, the gift he gave you is counted as still being part of the value of his estate for Inheritance Tax Purposes.
Once the seven years have elapsed, it is deemed to be no longer part of his estate and it will be ignored when valuing the estate at the date of his death.
Annual gifts of up to £3,000 are also allowed. If no gift was made last year, then last year's unused amount of £3,000 can be gifted as well, bringing the maximum excluded gift to £6,000.
A further £5,000 can be given away to a son or daughter in consideration of marriage. Grandparents can gift £2,500 and non-relatives £1,000.
Note that gifts above these amounts will not be taxed in any way, unless the person making the gift dies within the magic seven year period - when the amounts gifted will be added into the overall estate of the deceased when valuing it for Inheritance Tax Purposes.
Edited by Eric Mc on Saturday 22 March 12:17
I wasn't aware of any sliding scale of tax for gifts between 6 and 7 years of death.
Inheritance Tax is another Self Assessed form of tax - the legal obligation is on the tax payer to declare the correct amount and surrounding circumstances. However, as the taxpayer is usually deceased it falls on the executor (often a solicitor) who will be required by both tax and money laundering (not to mention professional) regulations to complete any returns correctly and make all the necessary declarations.
Inheritance Tax is another Self Assessed form of tax - the legal obligation is on the tax payer to declare the correct amount and surrounding circumstances. However, as the taxpayer is usually deceased it falls on the executor (often a solicitor) who will be required by both tax and money laundering (not to mention professional) regulations to complete any returns correctly and make all the necessary declarations.
srebbe64 said:
I think I'm correct that it's not a straight 7 year line. For example, if he dies after 6 years then there will be some Tax to pay, but not too much.
yes, it goes down 20% per yeari.e.
if the giftor dies after 0-3 years, then 100% of the gift is taxable,
between 3-4 years 80%
4-5 60%
5-6 40%
6-7 20%
7+ 0%
http://www.hydepark-ifa.co.uk/iht.htm
Never underestimate what these guys can find out. I have heard a story of an old boy giving his family a painting which was worth a good few quid to get it outside of his estate. The family hung it in their dining room and the old boy, as he had done for many years, would come round every Sunday for lunch. When he died (more than 7 years after gifting it), the tax people saw that although the old boy had given the painting away, he had still 'enjoyed' its use and included it in the IHT calculation.
It's the same with property. If my mum owned a 2nd property and she gave it to me to get it outside her estate BUT then continued to visit it every year for a holiday she would still be seen as receiving a benefit from it. If on the other hand I charged her market rate rent for the time she stayed in it then that would be fine.
There are other ways to get money out of your estate sharpish though. If someone is already comfortably off but then inherits a large chunk of money / property/ valuables etc that they have no need for and do not want them in their own estate they can get a solicitor to, in effect, amend the will so that someone else is the beneficiary (there is an official name but I can't remember it)e.g. their kids. This means it completely bypasses the official beneficiary and is never seen as part of their estate.
It's the same with property. If my mum owned a 2nd property and she gave it to me to get it outside her estate BUT then continued to visit it every year for a holiday she would still be seen as receiving a benefit from it. If on the other hand I charged her market rate rent for the time she stayed in it then that would be fine.
There are other ways to get money out of your estate sharpish though. If someone is already comfortably off but then inherits a large chunk of money / property/ valuables etc that they have no need for and do not want them in their own estate they can get a solicitor to, in effect, amend the will so that someone else is the beneficiary (there is an official name but I can't remember it)e.g. their kids. This means it completely bypasses the official beneficiary and is never seen as part of their estate.
on a gift of £40k there will be no sliding scale - the value of gifts made in the last 7 years is FIRST taken off the nil band of the dead person - so if grandad ONLY gave £40k and dies in 2010 with a Nil Band of £350k then his nil band covers the gift and leaves £210k to offset against the rest of the estate (so no tax on the £40k and so nothing to slide) ..... if he gave away £600k then the £350k would still leave £250k of the GIFT to tax (and to slide)...it also leaves ZERO nil band for the rest of the estate.
in summary.....small gifts, no scale.
ps - the romans had death duties so hardly a modern issue.
in summary.....small gifts, no scale.
ps - the romans had death duties so hardly a modern issue.
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