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bigduckontax
bigduckontax, Accountant
Category: Tax
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Hello, my daughter is a mature student, mid 40s, single mother

Customer Question

Hello, my daughter is a mature student, mid 40s, single mother with a school-age child. She currently receives housing benefit to pay rent in a small house. She's in the final year of a first degree course and proposes to do a one-year master's course next year. As a retired professional homeowner, what level of financial help can I give her in the academic year 2014-2015 without jeopardising her housing benefit and my own IHT situation. Am I able to give her £6000 capital (because I did not use the £3000 allowance in the previous year) plus a small monthly allowance from my own income? Are there any other ways of helping her because she is a student and any taxation or other legal traps I need to be aware of? Thank you.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I am Keith and ready to assist you with your problems. My view is that you will have to tread very warily here as savings of over 6000 pounds are included as income in the housing benefit calculation. You will appreciate that your intentions will seriously affect your daughter's entitlement to housing benefits. I see you have grasped the IHT implications which can ultimately affect Inheritance Tax when you mention 3000 pound annual allowance. HMRC guidance is clear: Annual exemption You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don't use it in that year, the carried-over exemption expires.

 

A colleague reminds me that:

 

Your daughter would not lose housing benefit if her savings are below £16k.

You could give a gift against this year first. If this years allowance is exhausted then you could utilise unused allowance from previous year.

 

 

Customer: replied 3 years ago.


Thank you Keith, but could you also please comment on my query about paying her a monthly allowance too? For example, could you please confirm that if I were able to make her a monthly allowance of, say £300 pcm, provided it came out of my normal income (and not savings), then that would not contravene the tax rules.


 

Expert:  bigduckontax replied 3 years ago.
300 x 12 = 3600. As I said before you can give up to 3000 pa without breaking Inheritance Tax rules. However, if you have not used last year's 3000 allowance you can bring it forward one year only. What you cannot do is take this year's allowance back nor run the 3000 to the year after next. Hope that solves your problems.

Sorry for the delay in response, I was away on a short holiday.

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