How much money can be gifted before there is a tax on it?
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nickyp456
1 year ago
Expert Financial Adviser Answer
Paul Ross DipPFS CII(MP&ER)
answered 1 year ago
Let me guide you to the website, http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm which will give you simple info on this area.
The main problem with answering this question is that are many more questions than answers. Such as "are you the person receiving the gift or giving it". "What is your tax status?" and what is the inheritance tax situation?", so sorry if it sounds like sitting on the fence.
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The main problem with answering this question is that are many more questions than answers. Such as "are you the person receiving the gift or giving it". "What is your tax status?" and what is the inheritance tax situation?", so sorry if it sounds like sitting on the fence.
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
You can gift any amount of money, without any tax being due on the gift. However, if you die within 7 years then the amount you have given away (in total, within that seven years) will be counted back into your estate for inheritance tax calculation purposes.
Take care about capital gains tax, though. If you are giving away an asset (such as shares or funds, or a property, for example) then you (not the recipient) might have to pay capital gains tax. The gift will fall into the CGT regime if it is worth more than when you obtained it, whether as a gift or legacy yourself, or whether purchased. This year (2010/2011) the exemption is £10,100, and you would normally be liable for tax at 18% on any total overall gain of more than that figure. Even if you give a property or other assets away, it is regarded, for the purposes of CGT calculation, as having been sold at normal market value.
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Take care about capital gains tax, though. If you are giving away an asset (such as shares or funds, or a property, for example) then you (not the recipient) might have to pay capital gains tax. The gift will fall into the CGT regime if it is worth more than when you obtained it, whether as a gift or legacy yourself, or whether purchased. This year (2010/2011) the exemption is £10,100, and you would normally be liable for tax at 18% on any total overall gain of more than that figure. Even if you give a property or other assets away, it is regarded, for the purposes of CGT calculation, as having been sold at normal market value.
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
I agree with the majority of what David has said but would add that when CGT is calculated, the notional rate of tax is linked to your taxable income. Therefore the 18% rate applies to the portion of the gain that falls within the basic rate tax band, above that the charge is 28%.
However, if you are gifting or receiving from your spouse or civil partner there are no tax issues as you can transfer assets freely but the recipient is regarded as having acquired the asset at the same price as paid by the donor (the person making the gift).
You can make gifts in anticipation of marriage and the amount varies according to the relationship between the donor and recipient.
if you are gifting cash and are concerned about inheritance tax (IHT) there are more allowances you can use such as the annual gift allowance of £3000 which can be carried forward 1 year, but if you have already made that gift you can make multiple gifts of £250 a year to anyone but not if they received the £3000.
you can also gift from your disposable income any amount as long as it doesnt impact on your lifestyle (ie you dont have to change where you shop, where or how often you holiday or buy a new car etc).
there are, as has been suggested, many answers to your question and a good IFA will be able to assist you but there is only so much advice you can obtain "for free" after all we had to spend time learning the information and constantly updating it!
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However, if you are gifting or receiving from your spouse or civil partner there are no tax issues as you can transfer assets freely but the recipient is regarded as having acquired the asset at the same price as paid by the donor (the person making the gift).
You can make gifts in anticipation of marriage and the amount varies according to the relationship between the donor and recipient.
if you are gifting cash and are concerned about inheritance tax (IHT) there are more allowances you can use such as the annual gift allowance of £3000 which can be carried forward 1 year, but if you have already made that gift you can make multiple gifts of £250 a year to anyone but not if they received the £3000.
you can also gift from your disposable income any amount as long as it doesnt impact on your lifestyle (ie you dont have to change where you shop, where or how often you holiday or buy a new car etc).
there are, as has been suggested, many answers to your question and a good IFA will be able to assist you but there is only so much advice you can obtain "for free" after all we had to spend time learning the information and constantly updating it!
Expert Financial Adviser Answer
John Stirling
answered 1 year ago
I will also chip in with this one as there is one wrinkle that hasn't been mentioned, which is that if the gift has 'strings' - i.e. is deemed to form a discretionary trust (I won't go into detail here, but in essence where you retain a degree of control over the usage of the money) then it may be a chargeable lifetime transfer, rather than the potentially exempt transfer that Dr Carter is talking about.
If the gift is large (exceeds your inheritance tax nil rate band, generally £325,000), and is a chargeable lifetime transfer then there may be an immediate tax charge of 20% of the excess over the nil rate band.
Sorry for the technical terms, but this one does rather need specialist advice if the gift (or you have made gifts in aggregate over the last 7 years) is more than £325,000, and it has strings.
That of course assumes it's cash. If it is not cash then all the points made above come into play regarding capital gains tax too.
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If the gift is large (exceeds your inheritance tax nil rate band, generally £325,000), and is a chargeable lifetime transfer then there may be an immediate tax charge of 20% of the excess over the nil rate band.
Sorry for the technical terms, but this one does rather need specialist advice if the gift (or you have made gifts in aggregate over the last 7 years) is more than £325,000, and it has strings.
That of course assumes it's cash. If it is not cash then all the points made above come into play regarding capital gains tax too.
