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How does gifting cash work?
- Thread starter Diagro
- Start date
Soldato
Just a FYI, pension pots are tax free...
I would suggest getting them to see a financial advisor, but what people are saying is correct;
They can only give away a certain amount in total to a load of people or just one person in one year, £3,000.
Thou they can use upto one prevous year's unused allowance.
If a persons estate is over £325,000 tax-free threshold (including the amount given away already within the last 7 years),
Any cash gifts given within 3 years of death is taxed at 40%, and the 4-7 years is tapered according to which year it was given.
There is a small gift per person allowance of £250 per year and there's a wedding allowance depending on the relationship between them and the person who is getting married.
What could be done.... is their house (if under £500,000) is gifted to a person, and then they can pay as much rent for living in that house and it's tax free on their end.
The person getting the house would have to pay stamp duty and income tax on the rent.
Pension inheritance: what happens to my pension when I die? | Unbiased
Understand what happens to your pension when you die and how inheritance works. Read now to learn about passing on your pension benefits.
www.unbiased.co.uk
I would suggest getting them to see a financial advisor, but what people are saying is correct;
They can only give away a certain amount in total to a load of people or just one person in one year, £3,000.
Thou they can use upto one prevous year's unused allowance.
If a persons estate is over £325,000 tax-free threshold (including the amount given away already within the last 7 years),
Any cash gifts given within 3 years of death is taxed at 40%, and the 4-7 years is tapered according to which year it was given.
There is a small gift per person allowance of £250 per year and there's a wedding allowance depending on the relationship between them and the person who is getting married.
What could be done.... is their house (if under £500,000) is gifted to a person, and then they can pay as much rent for living in that house and it's tax free on their end.
The person getting the house would have to pay stamp duty and income tax on the rent.
Soldato
My granny gave me £2,500 for Christmas just gone. She's 94, still fairly healthy, but by law of averages, it's unlikely she'll make another 4 or 7 years.
You quoted £3,000/year and £250/year as allowance examples. Which out of the £3,000 and £250 would the £2,500 gift fall under?
My yearly salary is only £18k, so would I still be liable to pay 40% on a £2,500 gift? It doesn't seem right to me because I would need to earn another £32k before I hit the £50k middle earners 40% tax band. So as a low earner myself, a £2,500 gift should fall in the 20% tax band or 30% if national insurance is factored in as well.
Soldato
it would fall under the large gift of £3,000 per year allowance as it's over the small gift amount of £250.
She can give the large allowance of £3,000 in total to as many people as she wanted and the amount given to each person is over £250 in total over that year; else it will fall under the small gift amount.
i.e. 10 people of £300 pounds each,
1 person of £2500 and another of £500
3 people of £300 pounds and 1 person of £2100.
If she didn't gift anything away the prevous year, she would have an additional £3,000 to give a way.
How Inheritance Tax works: thresholds, rules and allowances
Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.
Basically anything in total over £250 to the same person in the same year would be taken from the large gift allowance.
Anything under £250 in total for that year to the same person will be taken from the unlimited small gift allowance.
For example, I could give my fav niece £3000 per year and give all my other bratty nieces £250 each... if I was to give more that £250 to another neice, say £300, then my fav niece could only receive £2700 for the year. That's the way I read it anyway.
the 40% rate is a fixed rate but only if the gifts in the last 7 years and their remaining estate exceed £325,000 to stop people giving away everything before hand.
Soldato
Buy gold and give that to family. No receipts. Nothing. If tax people ask, it was all gambled away or given to charity anonymously!
No way the government should get any percentage of inheritance money or money gifted.
No way the government should get any percentage of inheritance money or money gifted.
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If it's land then keep in mind that there can be some IHT relief in some cases re: agricultural land (and IIRC forests).
So it might be more tax-efficient to *not* transfer it yet! If someone dies and their assets are transferred then the gains to that point aren't taxed, instead IHT applies.
Better to check properly (DYOR or better still seek professional advice from a tax advisor re
the specific scenario you've got in mind.
Soldato
If a 'relative' took £100k out of their bank as cash and gave it away, how would the tax people know who it was given to?
That's really dumb and bad advice for people, don't do that!
Firstly most people aren't even liable for IHT... a couple can give away up to 1 million (inc house) before it kicks in, secondly if you are a millionaire and you try to buy hundreds of thousands of pounds worth of gold to try and hide your assets then that's gonna open things up to obvious quesitons. This is all supposed to be done with executors appointed, a solicitor etc...
If on the other hand someone who is not a millionaire after retirement, care home cost etc.. was a paranoid fool and just bought a few grand in gold because they don't understand anything about IHT but think the government is out to get them then that's dumb too, they could have simply given those few thousand away with a simple bank transfer while they were alive or pledged various cash gifts in their will with no tax to pay at all.
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Soldato
Ok, what about the limit on 'gifting' money?
There isn't a limit on gifting money!
There's an annual threshold whereby gifts don't get added to your estate, but again, see previous post regarding that!
Deleted member 266365
D
Deleted member 266365
You have 40,000 parents?
Soldato
I see. So if i wanted to give £10k to a friend thats fine? No tax implications?
Associate
Having never received more than a couple of grand, I guess it can't just go bank to bank?
Or for "payment for a service"
Or for "payment for a service"
Just a FYI, pension pots are tax free...
Pension inheritance: what happens to my pension when I die? | Unbiased
Understand what happens to your pension when you die and how inheritance works. Read now to learn about passing on your pension benefits.www.unbiased.co.uk
Only if the person who passing on the pension pot is under 75 at age of death, otherwise income tax is payable by the beneficiaries at their marginal rate.
See the 'When you pay tax' section here.
That depends, again see the second post in this thread. For the vast majority of people there are no tax implications but if you're wealthy enough to be impacted by IHT and die within 7 years then giving £10k away within a single year does have tax implications.
Soldato
Buy whisky/whiskey, in last 10 years it has out paced everything at a rate of 373% appreciation..
But you would need to invest in storage, the cost of run the right temperatures and of course buy the right bottles.
A major issue, is that most of us know sweet FA about whisky/whiskey apart from how to drink it... lol
Soldato
I'm loving the posts about gold.
inb4 Dr Evil / Goldmember jokes.
inb4 Dr Evil / Goldmember jokes.
Soldato
I'm loving the posts about gold.
inb4 Dr Evil / Goldmember jokes.
How about buying Haribo instead!