stilover

Right.

If someone wants to give a Financial gift to a child and their estate is worth less than the Inheritance tax threshold, is the recipient of the gift still eligible for tax on that gift, if the parent dies within 7 years?

Without wanting to seek legal advise (at this stage) I was wondering if anybody on here knows the implications on gifting money from parent to child.

I'm sure it is only if the parents estate is eligible for Inheritance tax, that they then demand Tax on financial gifts given within the 7 years.

Answers welcome.

Longjing

This information is a bit old and I can't guarantee it, but...

A lifetime ("inter vivos" in the jargon) gift is a potentially exempt transfer. If the donor lives another 7 years, it effectively ceases to be part of the donor's estate for IHT purposes. If not, it becomes a taxable transfer, but the IHT rate is reduced depending how much time has passed since the gift was made. If that gift becomes taxable because the donor dies, the normal rules apply I think - eg the nil rate band remains.

IHT falls primarily on the donor. Gifts from income are also exempt from IHT, as are gifts on marriage and a few others. It's normally possible to manage these exemptions a bit.

TopBanana

No of course not. Obviously you need add the value of the gift to the remaining estate to calculate what's due

stilover

Yeah, that's what I thought.

Someone said something different to me, and got me thinking. Better to check though

The Snug Rhino

Assuming no other gifts have been made Mr A could gift £300k to his kid and the kid would still pay no tax within 7 years or after.

The person in receipt of the gift ONLY pays tax if the value of gifts given is MORE than the nil rate band thus the band can not cover them.

So.....give up to £300k and there's no tax for the one who gets the gift and no taper relief is applied or relevant.

douglasb

Sorry if this is going a bit off-topic, but does the recipient of the gift have any liability for Income Tax? This is assuming that the recipient is a taxpayer.

Luminous

iTrader: (3)

I'm pretty sure the answer to that question is no. If the gifts were in due to the recipient having carried out some work/services then they would have received a payment rather than a gift. If that were the case then they would have income tax to pay.

J4CKO

iTrader: (1)

Also, you can buy insurance against the person you are gifting becoming liable for the tax if the person giving the gift dies.

RRH

I'm fairly sure my paretnts have a policy to cover inheritance tax, although I think it reduces every year now due to their age and the fact they haven't increased the premium paid.

In any event, I think they've near enough finished spending my inheritance on such frivolities as heating, electric.... food

The Snug Rhino

to answer the above.....you pay income tax on income, a gift is a gift - not income....no income tax due.

you can buy insurance to cover the tax on the gift.....but as explained above the tax is only an issue on gifts totaling £300k or more so the policies are rarely needed.

life policies reducing in old age is due to too cheap a plan being sold in the first place. they normally have built in investment to cover the cost of rising premiums in the future.......pay a small premium when you start and theres little investment element - thus a reducing sum assured when you get older unless you dip into your own pocket.


while we are on the subject.......two nil rate bands = £600k so a married couple with an IHT efficient will only pay IHT on their surplus above that - i still see so many people were IHT was paid on estates under £600k because no one was bothered to do a decent will.

Robert Rosario

So do I.

Good job we are here to put them on the straight and narrow.