Giving lump sum to family

chocy

chocy

chocy

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I'm new on here but thought somone might be able to help or have experienced something similar.

Basically I'm trying to find out if there is a limit to how much money an elderley parent can give away to family without them being taxed on it. I've had a look on various websites - HMRC etc and understand that the inheritance tax limit is £325k but if the gift payments and estate at the time of death is below that, will any tax be due? I have been told that you can't give away more than £30k while still alive but not sure if this is true?

For example could they give £60k to their son, £60k to their daughter and then when they die, their house worth approx £180k be split between the son and daughter without any tax implications?

Hope this makes sense!
 
Seek professional independent advice, or CAB might know. If you're talking five figures, it'll worth getting an accountant to advise you properly.
 
Moses99p said:
The way to do it is to give the money seven years before death, then it's tax free...within those seven years it's staggered, too... so after six years you get a 80% reduction in the level of inheritance tax, for example, iirc. Also, it's possible to give a load of £250 gifts out, a £5000 gift for a wedding, £3000 a year generally and a shed load of money to support kids through education (even when over 18).

That's as far as I remember, anyway... just look on the HMRC website, or seek professional advice (as we are talking about a fair chunk of cash).
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Not quite, there's capital gains tax to be paid on gifts over a certain amount. :)
 
meghatronic said:
Seek professional independent advice, or CAB might know. If you're talking five figures, it'll worth getting an accountant to advise you properly.
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Yes, will be getting professional advice as it all seems very complicated. I was just trying to get a rough idea in the meantime but will wait to hear what the experts advise!
 
Isn't it supposed to be going up to about £1m in the near future anyway, finally going back to doing what it was meant to be doing in the first place, taxing the rich and not the average person... (whether it's right is different).
 
Withdraw it in cash and pay them it? There must be a way around paying tax on some money YOU have and want to give to someone? I don't understand this at all and why tax comes into play like this.
 
Moses99p said:
The way to do it is to give the money seven years before death, then it's tax free...within those seven years it's staggered, too... so after six years you get a 80% reduction in the level of inheritance tax, for example, iirc. Also, it's possible to give a load of £250 gifts out, a £5000 gift for a wedding, £3000 a year generally and a shed load of money to support kids through education (even when over 18).

That's as far as I remember, anyway... just look on the HMRC website, or seek professional advice (as we are talking about a fair chunk of cash).
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Does this not assume you know exactly when you're going to die?
 
Moredhel said:
Not quite, there's capital gains tax to be paid on gifts over a certain amount. :)
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Capital gain on what?

There are no capital gains on cash.

Moses has it about right - the only tax in play here is inheritance tax. The current nil-rate band is £325k. There is also a £3,000 annual exemption - this can be rolled forward for one year only.

Gifts to spouses are exempt, and any nil rate band they don't use on death (e.g. all assets transferred to husband/wife) can be used by the surviving spouse on their death as a percentage of what they didn't used based on the NRB on the date of the second spouses death. So if the second spouse died this year, and the previous spouse had died leaving everything to their surviving partner, they would have an additional 100% of the £325k - so £650k in all.

There are also various other exemptions as Moses points out, though these probably aren't relevant in this case.

For cash, unless to a trust, this will be a 'potentially exempt transfer'. This is not chargeable on transfer, but will become chargeable if the donor dies within 7 years (hence 'potentially exempt'). The value of the PET will be the amount gifted, less any annual exemption remaining (which may include the previous year's - i.e. if this is the only gift in lifetime, £6k can be deducted).

So a £120k gift would be a £114k PET if we have the two AE's to use.

If it became chargeable (i.e. donor dies within 7 years of the gift), then:

(1) tax would be due on the amount paid by the *donee*. This is at 40% of the value of the PET, but this is reduced by taper percentages from 20% (3-4 yrs) up to 80% reduction (6-7 yrs). Those percentages are top of my head - but I think they're accurate.

(2) it would be included in the death estate and set against the nil-rate band before other assets left on death. So, if death was this year, you would have £325k less £114k = £211k to set against the death estate, and 40% due on the balance above that. Note that, as above, you may also be able to included a proportion up to 100% of a second nil-rate band relating to a deceased spouse.

In this case, it would seem it would all be under the threshold. None of this should be construed as advice, just my ramblings. Seek professional advice if you want to be sure of the position - but this is the gist.
 
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Moses99p said:
How does the capital gains allowance work with that? The HMRC website says it's £10 100 a year, at the moment... so if someone's owned something for 20 years, and it's increased by value by £202 000, then there's no capital gains tax to be paid if that thing is given to someone else... but if it had gone up by £212 000 then there would be capital gains tax to be paid on £10k?

(For the sake of argument, let's say the capital gains allowance has been £10 100 forever, haha).
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Though this isn't totally relevant to the thread, as cash is exempt from CGT. The annual exemption can't be rolled forward, unfortunately.

You can generate a gain or a loss on chargeable items (e.g shares, property), net them all off, deduct your £10,100 annual exemption, and pay 18% on the balance. The gain or loss is literally what you got for it less what you paid for it (and any selling costs etc).

There are various reliefs that either reduce the gain (e.g entrepreneur's relief on selling all/part of a business brings it down to an effective 10%, gain on a property you've lived in all the time you've owned it usually has 100% relief under PPR) or defer it (e.g. gift relief can defer the gain if you gave a business/shares to your children for nothing, rollover relief if you used the proceeds from the sale of a business asset to buy another one).

This may all change on 22 June though...
 
chocy said:
Yes, will be getting professional advice as it all seems very complicated. I was just trying to get a rough idea in the meantime but will wait to hear what the experts advise!
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The idea you'll get here is so rough that you’ll wish you hadn’t asked. ;)
 
dante6491 said:
Nope. It has been cancelled.

From what my Grandfather has done, as long as you are alive five years after you gave the money then there is nothing that can be done. Die, and well, tax tax tax.
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Well that's depressing... I thought iw as announced in the con-lib manifesto as well..
 
Amp34 said:
Well that's depressing... I thought iw as announced in the con-lib manifesto as well..
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It was sort of mentioned as 'not likely to happen in this parliament'. i.e. the lib-dems got that as a concession. It's not going to happen this time round, in all probability.
 
I wonder if you can get around this by placing a bet between the 2 family members on a peer to peer betting site. On person backs for 50k and the other lays the bet. Around 3% commission and it's all legal. Winnings from gambling are tax free.
 
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