Regular gift payments from parents, taxable?
Discussion
Not me, unfortunately, but conversation at work today with a girl who says she receives a regular payment of 500 quid a month from her retired parents to help with her monthly bills etc.
I thought such a payment would be taxable in some way, but she reckons not. From and inheritance tax perspective, even though its over 3k a year, apparently as it is paid out of her parents taxed income, (pension) and not out of capital, there is no iht to worry about, as it is already been taxed once.
But should she be paying tax on it, or declaring it ona to return? Agin, if it us been taxed once, it makes sense that it is tax free to her, but it sort of sounds a bit wrong and she's getting worried that shell end up with a tax bill from it one day. She's been asked about it by her bank a couple of times too.
It is a gift, she doesn't have to work for it, and whilst she's asked for it as cash, her parents feel happier with it as. Direct debit, which is of course, fully traceable.
So should she declare it as income and pay tax on it? Or declare it as non taxable? Or just not declare it as it is no ones business? I couldn't find out much about such a regular payment, only info on larger one offs and the 7 yr rule etc.
I thought such a payment would be taxable in some way, but she reckons not. From and inheritance tax perspective, even though its over 3k a year, apparently as it is paid out of her parents taxed income, (pension) and not out of capital, there is no iht to worry about, as it is already been taxed once.
But should she be paying tax on it, or declaring it ona to return? Agin, if it us been taxed once, it makes sense that it is tax free to her, but it sort of sounds a bit wrong and she's getting worried that shell end up with a tax bill from it one day. She's been asked about it by her bank a couple of times too.
It is a gift, she doesn't have to work for it, and whilst she's asked for it as cash, her parents feel happier with it as. Direct debit, which is of course, fully traceable.
So should she declare it as income and pay tax on it? Or declare it as non taxable? Or just not declare it as it is no ones business? I couldn't find out much about such a regular payment, only info on larger one offs and the 7 yr rule etc.
Regular gifts or payments that are part of your normal expenditure
Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.
These include:
monthly or other regular payments to someone
regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
regular premiums on a life insurance policy - for you or someone else
Source: http://www.hmrc.gov.uk/inheritancetax/pass-money-p...
Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.
These include:
monthly or other regular payments to someone
regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
regular premiums on a life insurance policy - for you or someone else
Source: http://www.hmrc.gov.uk/inheritancetax/pass-money-p...
CaptainSlow said:
hmm I'm not so sure. I would have thought it would be a pet from an IHT perspective, I'm sure Eric will be along shortly.
Hi, one of the exemptions from IHT is gifts out of income. They have to be genuine gifts and can't affect their standard of living. If this is the case they aren't likely to be PET's.If it was a gift out of capital then it is likely to be a PET.
They are also not likely to be taxable as income tax on the recipient because tax will have already been paid by the parents.
I'm not a financial adviser though so please do your own research
Hope that helps.
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