Gifting Money

[Batman7070]

Ive heard that there is a £3000 limit on the amount of money you can gift someone before HMRC want to tax it.

How do they know youve gone over the limit?

[factor-fiction]

There is no tax to pay on gifts.
Maybe you are confusing this with Inheritance Tax.
It's only a issue if the donor has an estate that is large enough to attract IHT (usually over around £325000 or £650000 ) and whether the donor dies within 7 years

[factor-fiction]

And if IHT is payable is the estate that pays the tax, not the donor (he or she has died) nor those who received the gifts.

[factor-fiction]

If IHT concerns is the issue let us know and we can find the info you need on how to make gifts exempt or minimise IHT

[craft1948]

I thought there was a limit on what monies you could gift people, I heard it was £18000 in any one tax year (maybe I was told rubbish)

[margie04]

I too understood there was a limit: £3000 a year before the recipient was taxed, but you could use the allowance from the previous year to give a gift of £6000.

[dzug2]

There is no gift tax in the UK. You can give as much as you like without either you or the recipient paying tax on the gift.

The limits that you hear mentioned are not to do with gift tax but with inheritance tax - they are the amounts you can give each year without your estate having to pay inheritance tax if you die within 7 years of making the gift. Above those limits, then your estate may have to pay inheritance tax - but only if it's large enough. if it's large enough.

[Graham-W]

There's also a problem if the council believes you have gifted money away to avoid paying care home fees. The council can look back further than 7 years if they suspect this has been done.
"You may choose to give money or assets to your children or grandchildren. There is no monetary limit on gifts to your children, grandchildren or other relatives, but they may have to pay tax on any interest or income they receive.

If you give an asset to someone within the seven years before you die, the person who receives the gift may have to pay Inheritance Tax on it. It is against the law to transfer ownership of an asset to another person specifically to avoid paying your care home fees.

There is no time limit as to how far back a Trust can go to find out if you have given away assets to avoid paying care costs.

If this is found to have happened, the Trust can treat you as if you still had the asset and you will have to pay for your care accordingly.

If the transfer was within six months of you needing care then the Trust can recover the cost of your care from the person(s) who received the gift.
The law states that if you've transferred an asset to another person within the six months before you get a place in a care home, your local Trust can make you pay your care home fees."

http://www.nidirect.gov.uk/your-home-your-assets-and-your-care-home-fees

[FredPuli43]

From memory of personal experience,the only way that the Estate will not have to pay inheritance tax on sums above £3,000 per annum is if the executors can show that the monies were paid to a dependant for his or her necessary maintenance. When I had this problem, I noted that HMRC was anxious to discover whether the sums so paid were out of the deceased's income, which they calculated by estimating the deceased's personal requirements for her own maintenance and then seeing whether that amount plus the payments out came to more than her income. Evidently any extra was a payment out of capital. They don't like that, whatever the payment is for !

(This is trespassing on Barmaid's territory, but that's how I remember it)

[Batman7070]

Hello and Thank you to all who have responded to this post. Just to Clarify things Inheritance tax I understand to a large extent. It is not included in my gift idea. The gift is purely a lump sum of cash in the form of an electronic bank transfer to the recipient, the amount of which will be in five figures thus exceeding the £3k limit I had heard of.

It seems from the responses so far that gifting money as I have described is not taxed. Phew!

[factor-fiction]

The recipient may get some questions regarding possible money laundering though

[Peter Pedant]

Oh. you're the giver - you can give what you like
but over £3k you have to survive 7 yrs or else up to 40% tax is levied.

It is obvious that if you are giving large amounts then your estate will be above £325k. Send a letter slong with the gift saying that it is out of income. At least when you die, the beneficiary has a fighting chance - to avoid a tax bill.

Any large transfer of money electronically will attract official scrutiny and you have to grit your teeth and get on with it. Surprisingly not as new as people think. It is in the Banking Act 1925 when the amount was set at £25.

[factor-fiction]

If you are married though the allowance of £325000 before IHT kicks in gets transferred over to your spouse I believe, making the spouse's allowance £650,000. If you area widow you should already have had your allowance raised to £650000. And remember, the 40% tax only applies to amounts over the threshold- the first £325K/£650K is not subject to IHT.

[trt]

This might help B/M from the May 2013

http://www.theanswerbank.co.uk/Business-and-Finance/Personal-Finance/Question1244607.html

[Peter Pedant]

I have got my tax law badly wrong at times....
but I still disagree with some of the posts

£3k a year - £250 in extra gloops to different people-
I imagine you wouldnt be asking if IHT werent an issue in your estate

I looked for the HMRC docket on this - v straightforward
however instead I have accessed the exciting HMRC manual on IHT
and it is here:
http://www.hmrc.gov.uk/manuals/ihtmanual/

wh I will spend the Xmas hols reading

Basically - any amount so long as you live seven y after transfer and do NOT retain benefit (like gift a house and go on living in it or even visiting it and sleeping in it AT ALL )

and gifts out of income - any amount - but it would be wise to show it is out of income to the donee ( lucky fellow you are giving it to)

are the two exceptions to the above rule.

[Peter Pedant]

Later

the ref is this

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#2

3k etc