Gifting money

[illmonkey]

A scenario: Parents give child a large chunk (£25k) of cash for a deposit of a house.

What's the potential problems, tax, etc?

Second scenario: Money is earnt from a side line (selling small items for a website), won't make more than £2k profit.

Again, potential tax issues etc?

[auditt]

First question; If the parent survives 7 years after making the gift, it's no longer included as part of the giver's estate for inheritance tax purposes.

But, If the parent dies in within seven years; If the giver dies:
0-3 years after the gift then 100% IHT is payable
3-4 years after the gift then 80% IHT is payable
4-5 years after the gift then 60% IHT is payable
5-6 years after the gift then 40% IHT is payable
6-7 years after the gift then 20% IHT is payable

Hope this helps

[Mx_Stu]

illmonkey said:

Second scenario: Money is earnt from a side line (selling small items for a website), won't make more than £2k profit.

Again, potential tax issues etc?

A profit is a profit i'm afraid so it has to be declared to HMRC via your personal tax return. Only saving grace is if it's your only income and is less than £6,475 per annum in which case no tax to pay.

[Wings]

illmonkey said:

A scenario: Parents give child a large chunk (£25k) of cash for a deposit of a house.

What's the potential problems, tax, etc?

Second scenario: Money is earnt from a side line (selling small items for a website), won't make more than £2k profit.

Again, potential tax issues etc?

Each parent is allowed to gift free of tax £3k per year, and back date to the previous tax year, so mum and dad can gift £12k free of tax. Nothing to stop son's grandparents or wife's parents doing the same. Also remember that any access income can also be gifted free of tax, but the same must be seen as regular payments.

[Wings]

illmonkey said:

A scenario: Parents give child a large chunk (£25k) of cash for a deposit of a house.

What's the potential problems, tax, etc?

Second scenario: Money is earnt from a side line (selling small items for a website), won't make more than £2k profit.

Again, potential tax issues etc?

Each parent is allowed to gift free of tax £3k per year, and back date to the previous tax year, so mum and dad can gift £12k free of tax. Nothing to stop son's grandparents or wife's parents doing the same. Also remember that any access income can also be gifted free of tax, but the same must be seen as regular payments.

[Tiggsy]

auditt said:

First question; If the parent survives 7 years after making the gift, it's no longer included as part of the giver's estate for inheritance tax purposes.

But, If the parent dies in within seven years; If the giver dies:
0-3 years after the gift then 100% IHT is payable
3-4 years after the gift then 80% IHT is payable
4-5 years after the gift then 60% IHT is payable
5-6 years after the gift then 40% IHT is payable
6-7 years after the gift then 20% IHT is payable

Hope this helps

Would almost NEVER pan out like that though.

On death the nil rate band for IHT (325k) is first used to cover gifts made - so unless they had used that up (not likley) the gift has 0 tax due whenever the folks die.

[Defcon5]

How do they know that you have been given the money? If my mum transferred 10k from her accont into mine tomorrow would HMRC be kicking my door in by the weekend or what?

[auditt]

Defcon5 said:

How do they know that you have been given the money? If my mum transferred 10k from her accont into mine tomorrow would HMRC be kicking my door in by the weekend or what?

Would that not create a paper trail?

[Defcon5]

auditt said:

Defcon5 said:

How do they know that you have been given the money? If my mum transferred 10k from her accont into mine tomorrow would HMRC be kicking my door in by the weekend or what?

Would that not create a paper trail?

Yes - but it she wants to give me the money, why cant she without tax being paid?

[Gareth79]

Defcon5 said:

auditt said:

Defcon5 said:

How do they know that you have been given the money? If my mum transferred 10k from her accont into mine tomorrow would HMRC be kicking my door in by the weekend or what?

Would that not create a paper trail?

Yes - but it she wants to give me the money, why cant she without tax being paid?

No tax is payable on gifts while somebody is alive, it only becomes an issue when they die - only then are gifts made in the previous seven years looked at.

I assume the executor has to gather much paperwork as possible and identify gifts which might affect the inheritance tax due.

Edited by Gareth79 on Tuesday 17th August 21:13

[Defcon5]

Ahh I see. Thanks!

[Tiggsy]

your mum can do what she likes but when dead the executors have a legal responsibility to do their job properly. in reality, millions is given away and never added to an estate - esp stuff like rings, watches, etc.