Gifting £10000 to sister - tax implications?
Gifting £10000 to sister - tax implications?
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Discussion

Daz1855

Original Poster:

363 posts

191 months

Thursday 22nd December 2016
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As per title really, I would like to write my sister a cheque for £10000 for no reason other than I want to.

I have not bought anything from her, she has not worked for me, nothing to consider here other than the money changing hands in one direction - it is a gift with no strings attached.

Somewhere in the back of my head I recall that you can gift someone £3000 per year (£6000 if you include the previous year) without the tax man getting into a strop. We are both young enough for there not to be any IHT implications to consider.

Could someone in the know please tell me where I/she stands with the tax man?

Ta very much

Eric Mc

125,718 posts

295 months

Thursday 22nd December 2016
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You can give her as much as you like and there is no direct tax implication at all.

The main issue is what happens with the gift amount if you die within seven years of making the gift. Otherwise, there is nothing to worry about.

Daz1855

Original Poster:

363 posts

191 months

Thursday 22nd December 2016
quotequote all
Thanks Eric, I shall make a point of living a minimum of seven years more if nothing else to reduce any tax burdens thumbup

wilwak

759 posts

200 months

Thursday 22nd December 2016
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Eric Mc said:
You can give her as much as you like and there is no direct tax implication at all.

The main issue is what happens with the gift amount if you die within seven years of making the gift. Otherwise, there is nothing to worry about.
This is spot on.

You can give away whatever you like but if you fail to survive 7 years then there may be inheritance tax due as it would be assessed as part of your estate on a tapering basis.



Eric Mc

125,718 posts

295 months

Thursday 22nd December 2016
quotequote all
There are a couple of other "exemptions" as well.

Annual gifts up to £3,000 will be excluded as will "Gifts out of Annual Income" *(which is a bit harder to define).

ellroy

7,841 posts

255 months

Thursday 22nd December 2016
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OP/Eric both correct.

If you've not used your annual £3k you can go back one year, so of your £10k, even if you were to die within 7 years, and assuming an estate in exceeds of £325k, your gift would only be £4K as far as any eventual IHT calculation is concerned.

OP, lovely gesture by the way. Your sister has a great brother.

Merry Xmas.

SystemParanoia

14,343 posts

228 months

Thursday 22nd December 2016
quotequote all
So if i pulled out £10k cash.. threw it away in a casino.. so no receipts or evidence. and then die within 7 years because of how awesome i am.

its still classed as part of my estate for tax reasons even though its spent and gone and was never gifted to anyone?

( if only i had £10k hehe )

ellroy

7,841 posts

255 months

Thursday 22nd December 2016
quotequote all
No, it wouldn't be included because you'd have spent it, not given it away.

SystemParanoia

14,343 posts

228 months

Thursday 22nd December 2016
quotequote all
but without evidence how would HMRC know ?

cant op just say he spent/lost it in that case?

anonymous-user

84 months

Thursday 22nd December 2016
quotequote all
SystemParanoia said:
but without evidence how would HMRC know ?

cant op just say he spent/lost it in that case?
I guess they could, if so inclined, look into family bank account details and see the £10k transaction?

thebraketester

15,797 posts

168 months

Thursday 22nd December 2016
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To pull out 10K of a bank account they usually quiz to to its whereabouts and what its being spent on.

SystemParanoia

14,343 posts

228 months

Thursday 22nd December 2016
quotequote all
garyhun said:
I guess they could, if so inclined, look into family bank account details and see the £10k transaction?
Just keep the cash in a box and use it for day to day living as well as deposit £200 or so per month into the bank... nice and slow

thebraketester said:
To pull out 10K of a bank account they usually quiz to to its whereabouts and what its being spent on.
Just lie.. its a bank, and its your money. you have no legal obligation to be truthful about this to them.


but the point still remains even if i remove the sillyness.
how would HMRC know if i "lost" it or "gifted" it without me or anyone else involved specifically telling them?
I cant see them going through your entire life with a fine tooth comb over £10k of your own legally obtained and taxed money that you have chosen to do with as you wish ?

anonymous-user

84 months

Thursday 22nd December 2016
quotequote all
SystemParanoia said:
Just lie.. its a bank, and its your money. you have no legal obligation to be truthful about this to them.


but the point still remains even if i remove the sillyness.
how would HMRC know if i "lost" it or "gifted" it without me or anyone else involved specifically telling them?
I cant see them going through your entire life with a fine tooth comb over £10k of your own legally obtained and taxed money that you have chosen to do with as you wish ?
You are probably right.

What if you lent the money, interest free, but did not want it back for 50 years or so?

Bertrum

485 posts

253 months

Thursday 22nd December 2016
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I was under the impression you can use your 'gift allowance' from previous years..

Eric Mc

125,718 posts

295 months

Thursday 22nd December 2016
quotequote all
SystemParanoia said:
Just lie.. its a bank, and its your money. you have no legal obligation to be truthful about this to them.
Er - not quite.

Lying to HMRC is a criminal offence.

tribalsurfer

1,252 posts

149 months

Thursday 22nd December 2016
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SystemParanoia said:
cant op just say he spent/lost it in that case?
Not really, he'd be dead !!!!

SystemParanoia

14,343 posts

228 months

Thursday 22nd December 2016
quotequote all
Eric Mc said:
SystemParanoia said:
Just lie.. its a bank, and its your money. you have no legal obligation to be truthful about this to them.
Er - not quite.

Lying to HMRC is a criminal offence.
Absolutely i agree..
The op is also possibly not planning on dying in the next 7 years.

But its not on that a bank can question you on your motives with your own money.. effectively holding you to ransom unless you tell them something.

Lying to HMRC is not the same as not telling them ( IMHO )

Eric Mc

125,718 posts

295 months

Thursday 22nd December 2016
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Not telling them when you have a legal obligation to do so is the same in law as lying.

DonkeyApple

70,210 posts

199 months

Friday 23rd December 2016
quotequote all
ellroy said:
OP/Eric both correct.

If you've not used your annual £3k you can go back one year, so of your £10k, even if you were to die within 7 years, and assuming an estate in exceeds of £325k, your gift would only be £4K as far as any eventual IHT calculation is concerned.

OP, lovely gesture by the way. Your sister has a great brother.

Merry Xmas.
Well, that's just a wild assumption as his sister could be writing out a cheque to him, right now, for £100k, thus making him look a total tightwad ballbag. biggrin

Re the gifting, post dating the £4K balance into the New Year would use up next year's allowance leaving only £1k at IHT risk?

WindyCommon

3,896 posts

269 months

Friday 23rd December 2016
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The IHT discussion is a red herring in considering whether to make the gift or not.

Let's say you die in one years time with an estate subject to IHT:

- If you've given the £10k to your sister, IHT will be due on it as it will be deemed to be part of your estate
- If you haven't given the £10k to your sister, IHT will be due on it as it will be part of your estate

In other words the only tax consideration is that there is a potential IHT saving if you survive the 7 years. This isn't a reason to make (or not make) such a gift.