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Taxing gifts.

Community Veteran
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Registered: 02-08-2007

Taxing gifts.

I Recall reading somewhere that if you gave someone more than £3,000 in any one year the additional amount would be subject to Tax.
The question is how would the IR ever know. For example assume I owned some property worth a few million (which I don't in case you are wondering) I then sold that property and put the cash in the bank and then took out half a million and gave it to someone how would the IR know unless of course that person was a bit stupid and either banked it or bought a Rolls Royce or new house ?
15 REPLIES
BryanP
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Registered: 21-11-2011

Re: Taxing gifts.

The tax you are referring to is Inheritance tax and is only payable on death, if your estate is above the Inheritance tax threshold, if it is then up to the executors of the estate to declare any/all gifts made in the seven years preceding death
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Re: Taxing gifts.

I think tax is only due on any combined gifts totalling over £3000 if you die within 7 years.
Also, the unused annual tax exemption can be carried forward to the next year but not the years after.
2. Your Annual Exemption:
[quote=http://www.money.co.uk/article/1004329-how-do-i-gift-money-without-being-taxed.htm]You are allowed to give away a total of £3,000 each year, without any tax implications after your death.
Bear in mind that this is the total annual amount that you can give away, NOT a total amount you can give to each beneficiary, each year.
It is also worth noting that your Annual Exemption can be carried forward for one year if it has not been used. In other words, if you did not make any gifts of money during last year, you can give away a total of £6,000 this year. Equally, if you gave away £1,500 last year, you’ll be able to give away a total of £4,500 this year.
The Annual Exemption cannot be carried forward by more than one year.

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alanf
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Re: Taxing gifts.

Gifts of over £3000 would POTENTIALLY be liable to inheritance tax if the estate exceeded £325,000 and the deceased made the gift less than 7 years before dying.
Otherwise, as far as I am aware, there is no tax on gifts.
When making a self-assessment one is supposed to declare any gifts one has made above £3000.  If one fails to do so I am not sure how the tax man would spot any but the most obvious very large gifts.
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Re: Taxing gifts.

There's a lot more info near the bottom of this HMRC page.

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Community Veteran
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Re: Taxing gifts.

Of course gifts to your married spouse are tax free, such as a 3000 carat diamond necklace.
Now Zen, but a +Net residue.
nanotm
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Re: Taxing gifts.

because you have to pay the tax if you have given over 10k (regardless of years before death) to the same person, exemptions are made for children under the age of 16 so long as they only have a single bank account with less than 5k in it.....
its odd because as you say your allowed to spend whatever you like on a present for a relation without being required to report how much it cost, but any none relative you must report the gift's price tag, which is in case it changes the recipients tax code .....
just because your paranoid doesn't mean they aren't out to get you
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nanotm
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Re: Taxing gifts.

from your first link
Quote
Children under 18
If you want to start building a nest egg for your child ready to pay for tuition fees, a deposit on a new home or perhaps a car when they reach adulthood, then you need to be aware of the rules governing financial gifts to children under the age of 18.
While there is no limit on the amount of money you can give your child each year, if the interest they earn on the money exceeds a certain amount it could be taxed.

which as I indicated is a loophole allowing you to give away as much as you like year on year to children who are not adults.......but the limit of 10k to any none relative adult (as in not a family member) applies in the same way as not being allowed to transport more than 10k in currency across boarders without paying taxes on it (both export tax when leaving and import taxes when arriving at your destination ....)
its not a common question though but HMRC can advise of LTA's certainly its something to be aware of if you give chunks of cash to friends.
just because your paranoid doesn't mean they aren't out to get you
Community Veteran
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Re: Taxing gifts.

You really are talking a load of rubbish
The €10,000 (not £10,000) limit is for outside the EU and it isn't taxed at all by the UK it is only anti corruption measure http://www.hmrc.gov.uk/forms/c9011.pdf
Quote
You must complete this form if you are entering or leaving the European Union (EU) (see 3. below) and are carrying cash of a value of 10,000 Euros or more or the equivalent in other currencies. This law is to help combat money laundering and it applies in all EU countries.

The only taxes due on gifts is inheritance tax if you die within the 7 year window and the total including any gifts to non spouse in your will exceeds the inheritance tax limit
There isn't any £10,000 restriction - you will need to provide evidence of your assertion
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Re: Taxing gifts.

Quote from: nanotm
but the limit of 10k to any none relative adult (as in not a family member) applies in the same way as not being allowed to transport more than 10k in currency across boarders without paying taxes on it (both export tax when leaving and import taxes when arriving at your destination ....)

You can move as much as you like between countries. If it is money from income, then you normally have to pay tax at source.
Import/export taxes refer to taxes on goods (i.e. VAT/import duties) and not income tax.
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Re: Taxing gifts.

Quote from: Oldjim
The only taxes due on gifts is inheritance tax if you die within the 7 year window and the total including any gifts to non spouse in your will exceeds the inheritance tax limit

(less the annual gift exemption allowance of £3,000 - if used)
Community Veteran
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Re: Taxing gifts.

@gleneagles, If you decide not to die in the next 7 years (a sensible enough decision in my opinion) you can give me as much of your money as you like and the taxman (boo, hiss) won't get a penny of it so feel free if you wish..  Wink
Anyone gifting out of income (rather than capital) can die as soon as they see fit (though it's a pretty extreme way of beating the taxman IMO so I'm not suggesting that anyone should try it - the dying bit that is).
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nanotm
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Re: Taxing gifts.

Quote from: Oldjim
You really are talking a load of rubbish
The €10,000 (not £10,000) limit is for outside the EU and it isn't taxed at all by the UK it is only anti corruption measure http://www.hmrc.gov.uk/forms/c9011.pdf
Quote
You must complete this form if you are entering or leaving the European Union (EU) (see 3. below) and are carrying cash of a value of 10,000 Euros or more or the equivalent in other currencies. This law is to help combat money laundering and it applies in all EU countries.

The only taxes due on gifts is inheritance tax if you die within the 7 year window and the total including any gifts to non spouse in your will exceeds the inheritance tax limit
There isn't any £10,000 restriction - you will need to provide evidence of your assertion

my apologies the restriction was for gifts from people with tax free status ..... some of my friends got in trouble over it  a couple of years ago when gifting money to family once too often.....

anyhow my other point was still correct that a parent can give as much as they like to kids in small amounts but if you do it in big chunks then your subject to the 3k limit  which is rather barking mad
just because your paranoid doesn't mean they aren't out to get you
Community Veteran
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Re: Taxing gifts.

and that is also wrong http://www.money.co.uk/article/1007483-gifting-money-to-your-children-faqs.htm as linked previously
Quote
Children under 18
If you want to start building a nest egg for your child ready to pay for tuition fees, a deposit on a new home or perhaps a car when they reach adulthood, then you need to be aware of the rules governing financial gifts to children under the age of 18.
While there is no limit on the amount of money you can give your child each year, if the interest they earn on the money exceeds a certain amount it could be taxed.
You are getting confused with this which is the inheritance tax restriction
Quote
The annual allowance stands at £3,000 for the 2013/14 tax year, which means you can gift up to £3,000 to your children (or to anyone else you choose) this year without any inheritance tax implications.