Inheritance Tax Question

ok.

Anyway in the real world, you can receive a cash gift of #250 tax free. For a wedding, you can bump it up to 5k from each parent etc.

You can gift away larger amounts as part of your regular expenditure, if after audit it is clear that you still have an income on which you can survive (ie, you are not giving away all your money in advance of your death).

Distributing your 325k that you've magically removed from the bank is going to be very hard. FOr that money to be even remotely useful it needs to go into a bank. If you buy a car in cash, your name will be on the deal. A house? Same thing.

You will get audited.
 
OP give this a read: http://www.money.co.uk/article/1007483-gifting-money-to-your-children-faqs.htm


Inheritance tax sees the government take a slice of your estate before it's passed on to your loved ones; it is also applied to any monetary gifts you give in the 7 years preceding your death.

Your estate (the property, possessions and savings you leave behind) is valued when you pass away.
The first £325,000 of anything you own escapes inheritance tax (it's referred to as the nil rate band), however any amount over this is taxed at 40%.
For example, say your estate is valued at £425,000, the first £325,000 of this would escape inheritance tax. However, £100,000 of its value would be taxed at 40% so the tax man would claim £40,000 before the balance is passed to your next of kin.
Click to expand...
 
The answer to the question is it does not matter.

The outcome will be the same. If the person who gave the gift has an estate worth enough, the 10k will be taxed, wether the 10k was gifted, or not.

So what does it matter?
 
Bear said:
Im talking about taxation in general but in your case its even worse. On one side you have tax taken from someones earnings which they have worked for, and on the other, people are whining about taxation on free money they did nothing to earn.
Click to expand...
You are correct.

The usual brand of unenlightened self-interest, it's easier to claim values of equality when you have nothing to lose (but conversely it's easy to defend an unequal system a person is benefiting from). You see the same from people who claim to oppose any state services (ardent economic right wingers) who suddenly become socialists when their elderly parents require expensive care.

Many people seem to want socialism for them, capitalism for everybody else.
 
spoffle said:
The issue would be who to trace it to, though. Additionally cash doesn't take up that much space and I'd sooner trust a hidden safe room than a bank if I had the wealth to justify it.
Click to expand...

You're missing the point. If it can't be traced then the residual estate will be taxed. Remember, the estate pays the tax, not the recipient. It is a captive market.
 
It's still amazing that the government hasn't touched this 7 year and no tax on family gifts rule.

People are aware of the issue now and are planning much more often than they used to.
 
I have an IHT question that I simply can't find the answer too.

Wife makes a Potentially Exempt Transfer (PET) of £200,000 to her children and lives 2 years. The PET fails and becomes chargeable with no taper reilef.

How much IHT allowance gets transferred to the husband? 100% of the wife's NRB or is it reduced by the PET?

I'm thinking that as the PET failed, its as if it never happened so although it becomes chargeable it doesn't affect the transfer of NRB to the husband.
 
EddScott said:
I have an IHT question that I simply can't find the answer too.

Wife makes a Potentially Exempt Transfer (PET) of £200,000 to her children and lives 2 years. The PET fails and becomes chargeable with no taper reilef.

How much IHT allowance gets transferred to the husband? 100% of the wife's NRB or is it reduced by the PET?

I'm thinking that as the PET failed, its as if it never happened so although it becomes chargeable it doesn't affect the transfer of NRB to the husband.
Click to expand...

It would be treated as part of her estate - as a disbursement. If NRB was used to cover the £200k, avoiding IHT, then the transfer of NRB to the husband will be reduced by that amount. You would be getting the NRB twice, otherwise.
 
The PET fails and notionally forms part of her estate.

The PET was £200K so with no previous gifts was not immediately chargeable at the time as it was under the NRB.

So if it is deemed the PET never took place, does that mean that there is no affect in the transfer of NRB to the husband.
 
EddScott said:
The PET fails and notionally forms part of her estate.

The PET was £200K so with no previous gifts was not immediately chargeable at the time as it was under the NRB.

So if it is deemed the PET never took place, does that mean that there is no affect in the transfer of NRB to the husband.
Click to expand...

The £200k was a IHT-chargable disbursement, which means £200k of her NRB is utilised. Any remaining NRB is transferred to the Husband along with her remaining assets (which are an exempt transfer).

You could look at is as the £200k becoming part of husand's estate, and coming out of his now-doubled NRB as a non-PET transfer.
 
The_Abyss said:
No, you cannot. This exemption applies to gifts made during lifetime and does not apply after death.
Click to expand...

True, so using the OP's example the actual PET would only be £4k as you'd be using this year and last years Annual Exemption (Assuming no other gifts have been made)
 
This guy i work with said the best way to avoid the death tax is for the person to put the money in a trust then get the trust to pay out to the inheritor and then it just gets taxed as an income.

Gifts should not be taxbable its just the HMRC won't accept that it is a gift and will treat it as inheritance.
 
anything I don't mind said:
This guy i work with said the best way to avoid the death tax is for the person to put the money in a trust then get the trust to pay out to the inheritor and then it just gets taxed as an income.
Click to expand...

You pay tax at the time of putting anything into a trust as it's classed as a Chargeable Lifetime Transfer.

Either the donor or the receiver (donee) can pay the tax but if the Donor pays it (25%), then it's added onto the value of the transfer when calculating the death tax of the estate (assuming they die within 7 years).

Is there any reason they advised it being the best way to deal with it?
 
You must log in or register to reply here.
Back
Top Bottom