Annual allowances
Discussion
Looking into this for parents and in-laws
Looking at the HMRC page it appears you can give £3k per year to an individual without any tax implications (a log would need be retained). How many people is this limited to?
For instance we are a family of five could both sets of in-laws in theory give £3k to all 5 of us so £15k per parent and in-laws ie £60k a year to our family without any tax implications to us or them?
The next question they have is it also stats that gifts (not the 7 year rule) of up to £250 per gift can be given. So Sam’s scenario again would that be a maximum of 4x5x£250=£5k. Or could it be multiples of that? Ie birthdays Christmas anniversary Easter Father’s Day Mother’s Day well done for homework day?
Basically what could the maximum be? Could you in theory give £250 per day per person for 365 days of the year? As in with 4 in-laws and parents that would be 4x£250=£1k per person per day.
I assume there are restraints but both sets of in-laws and parents would like to know as if it’s a fairly loose definition then there could be a good way to give funds over without any tax implications (again all logged & im confident they could come up with lists upon lists of what the gift is for). This would then be a superior way to give wealth over without the 7 year rule.
Lastly one set of parents would like to put down house deposits for our three children (all primary school age). Now clearly you cannot own a house until 18yo but the idea is to buy to let it on a repayment mortgage so that when they are mid 20’s each will have a house mortgage free & they would like to push for 3 bed semis with the idea that they wouldn’t have to ever move or upgrade / takes huge worries away.
So is the property one easy hard or not really viable? Would the parents/inlaws essentially have to gift me and my wife the deposits in cash and then we buy the buy to let’s - but I think we would then see issues with Capital gains tax when we transfer the properties into their names (we too would like to NOT give it to them until they are mid 20’s in case sell house blow it all situation though it would always be their money we would merely be looking after it in their best interests).
Looking at the HMRC page it appears you can give £3k per year to an individual without any tax implications (a log would need be retained). How many people is this limited to?
For instance we are a family of five could both sets of in-laws in theory give £3k to all 5 of us so £15k per parent and in-laws ie £60k a year to our family without any tax implications to us or them?
The next question they have is it also stats that gifts (not the 7 year rule) of up to £250 per gift can be given. So Sam’s scenario again would that be a maximum of 4x5x£250=£5k. Or could it be multiples of that? Ie birthdays Christmas anniversary Easter Father’s Day Mother’s Day well done for homework day?
Basically what could the maximum be? Could you in theory give £250 per day per person for 365 days of the year? As in with 4 in-laws and parents that would be 4x£250=£1k per person per day.
I assume there are restraints but both sets of in-laws and parents would like to know as if it’s a fairly loose definition then there could be a good way to give funds over without any tax implications (again all logged & im confident they could come up with lists upon lists of what the gift is for). This would then be a superior way to give wealth over without the 7 year rule.
Lastly one set of parents would like to put down house deposits for our three children (all primary school age). Now clearly you cannot own a house until 18yo but the idea is to buy to let it on a repayment mortgage so that when they are mid 20’s each will have a house mortgage free & they would like to push for 3 bed semis with the idea that they wouldn’t have to ever move or upgrade / takes huge worries away.
So is the property one easy hard or not really viable? Would the parents/inlaws essentially have to gift me and my wife the deposits in cash and then we buy the buy to let’s - but I think we would then see issues with Capital gains tax when we transfer the properties into their names (we too would like to NOT give it to them until they are mid 20’s in case sell house blow it all situation though it would always be their money we would merely be looking after it in their best interests).
As I understand it the annual allowance of £3000 per donor per tax year is not in addition to the £250.
The £250 is also per tax year - not daily unfortunately.
I don’t think there are limits as to the number of people in either case that can be given money.
Wedding gifts are £5000 per parent and grandparents can give £2500 - this can accumulate with the annual allowance ie potentially £22k from one set of parents bearing in mind the annual allowance can be carried forward one year if not used.
Log in real terms simply means sensible to maintain records.
I believe numbers are correct but based on what we looked into when my son got married 5 years ago so apologies if not !
For your parents to leave money to your children is obviously dealable with in Will terms - giving them or you the cash now for house purchase now I guess must leave issues potentially with the 7 year rule.
When we have our son the deposit for his house there was a fair bit of Paperwork especially where the mortgage was concerned and I had to make clear it was a pure gift and I held no right in the property.
The £250 is also per tax year - not daily unfortunately.
I don’t think there are limits as to the number of people in either case that can be given money.
Wedding gifts are £5000 per parent and grandparents can give £2500 - this can accumulate with the annual allowance ie potentially £22k from one set of parents bearing in mind the annual allowance can be carried forward one year if not used.
Log in real terms simply means sensible to maintain records.
I believe numbers are correct but based on what we looked into when my son got married 5 years ago so apologies if not !
For your parents to leave money to your children is obviously dealable with in Will terms - giving them or you the cash now for house purchase now I guess must leave issues potentially with the 7 year rule.
When we have our son the deposit for his house there was a fair bit of Paperwork especially where the mortgage was concerned and I had to make clear it was a pure gift and I held no right in the property.
Both sets of parents have a notable inheritance tax based on current asset list. They all have good pensions - one set of parents live off state pension and a final salary they are deliberately leaving his wife’s pension untouched with the hope that they could transfer it Inheritance tax free to whoever they elect in a will.
So they do everything they want to do and don’t spend their pensions as is and are getting older so the bigger holidays they used to do overseas wouldn’t really now happen. So the total asset value would hold or grow. And they are invested strongly in equity too so growth (and risk) is there too.
As such they would rather reduce or eliminate the inheritance tax - would rather give it to our family / or anyone directly.
They have also flagged paying in the max £2,880 into child’s pensions and then also putting in the £9k ISA limit for them too which would also start eating into the total asset value.
So they do everything they want to do and don’t spend their pensions as is and are getting older so the bigger holidays they used to do overseas wouldn’t really now happen. So the total asset value would hold or grow. And they are invested strongly in equity too so growth (and risk) is there too.
As such they would rather reduce or eliminate the inheritance tax - would rather give it to our family / or anyone directly.
They have also flagged paying in the max £2,880 into child’s pensions and then also putting in the £9k ISA limit for them too which would also start eating into the total asset value.
Yup noted - I don’t know whether the annual allowances still apply for both pension and isa contributions from them although I suspect they do still apply ie £5000 max per child per year.
That said if your parents can hold the pensions etc in trusts naming your children when they pass away it may be possible to reduce inheritance tax then ?
That said if your parents can hold the pensions etc in trusts naming your children when they pass away it may be possible to reduce inheritance tax then ?
See here:
https://www.theprobatedepartment.co.uk/inheritance...
Note that the £3000 gift allowance is per year per donor, not donee, so if you have three children you cannot give them £3000 each, only £3000 in total, each year within the past 7 years before death without avoiding a claim back for IHT calculation.
You can also give gifts tax free out of income as long as your standard of living is not reduced as a a result. I think such gifts should be modest in order to avoid investigation.
R.
https://www.theprobatedepartment.co.uk/inheritance...
Note that the £3000 gift allowance is per year per donor, not donee, so if you have three children you cannot give them £3000 each, only £3000 in total, each year within the past 7 years before death without avoiding a claim back for IHT calculation.
You can also give gifts tax free out of income as long as your standard of living is not reduced as a a result. I think such gifts should be modest in order to avoid investigation.
R.
That’s the news I didn’t want to see 
.
So if paying £3k per child per year plus £9k child ISA only £3k in total would be an allowed allowance the rest would then need to be documented and flow into the Gifting with the tapering from 40% down to 0%.
Also would I be correct in stating that gifting property is simply a bad idea from a CGT perspective. / what’s the best way to transfer a property with the most tax efficient way ?
. So if paying £3k per child per year plus £9k child ISA only £3k in total would be an allowed allowance the rest would then need to be documented and flow into the Gifting with the tapering from 40% down to 0%.
Also would I be correct in stating that gifting property is simply a bad idea from a CGT perspective. / what’s the best way to transfer a property with the most tax efficient way ?
Regarding the annual allowance of 3k, this can be rolled over if you havnt given 3k in the previous year.
Example, no gifts to date then you can gift 6k (3k for this year and 3k for last year)
Other considerations;
A fund that holds only AIM shares, if held for two years the funds are then IHT exempt. (Said a fund as individual shares risk shortfall espicslly in the AIM marker)
Lastly as already mention gifts from income is something often overlooked.
Example, no gifts to date then you can gift 6k (3k for this year and 3k for last year)
Other considerations;
A fund that holds only AIM shares, if held for two years the funds are then IHT exempt. (Said a fund as individual shares risk shortfall espicslly in the AIM marker)
Lastly as already mention gifts from income is something often overlooked.
Gassing Station | Finance | Top of Page | What's New | My Stuff