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Re giving away excess income to my children and grandchildren

Resolved Question:

Re giving away excess income to my children and grandchildren to ultimately reduce inheritance tax liability.

I am retired and have a large share portfolio. I always utilize the tax free CGT allowance. Will HMRC allow this regular realization of capital gains as part of my income, rather than capital, for gifting excess income.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi

Thanks for your question

My name is XXXXX XXXXX I am one of the UK tax experts here on Just Answer.

Can you expand on what it is you wish to do?
Do you wish to sell the shares then gift the money
Transfer the shares -

But any action on the shares will always be a capital gain position - regardless of whether this is sale or transfer - and this cannot be treated as anything else.
Then you have the issue with Inheritance tax - then any gift in excess of £3000 (in total) made within 7 years of you passing away will be considered as to whether Inheritance tax applies. If more than 7 years lapse, then this drops from consideration for Inheritance tax.

Of course or Inheritance tax purposes, this only becomes a concern if your total estate (including any gifts) is in excess of £325,000 (or if you are a widow/widower this threshold plus any unused Threshold from your late spouses estate)

If my answer does not cover your question, then please do expand.

Thanks

Sam


Customer: replied 2 years ago.

My question boils down to


 


'are realised net capital gains treated as capital or income for giving to my children as part of excess income


 


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


Regular gifts or payments that are part of your normal expenditure


Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.

Expert:  Sam replied 2 years ago.
Hi

Thanks for your response and the clarification

I see - then no these are not considered part of your normal income - so would not be exempt.

The money has to be from your usual monthly income - so pensions or employment and the like for it to be considered as a regular gift exempt for Inheritance tax considerations.

Sorry the news is not better

Thanks

Sam


Sam, Accountant
Category: Tax
Satisfied Customers: 13699
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
You can make a gift of up to GBP 5K outside the tax envelope on the occasion of the marriage of the beneficiary.
Expert:  Sam replied 2 years ago.

Hi

 

 

Although Keith is quite right about this being an exempt gift if any f your children are due to marry in the near future, as you were asking about regular gifts and what constituted "monies" that could fall into that remit, that was what was provided.

However just in case you wanted more scope for consideration(although I am sure you are aware of these other options) I have provided a full list of exempt gifts - I have added a link here for you from HMRC website

 

 

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

 

 

Do let me know if you wish any clarification/further information on these exemptions

 

Thanks

 

Sam

Customer: replied 2 years ago.

Thanks for the link, which I had already seen. I would suggest that a good strategy if you reduced your assets down to the IHT threshold over 7 years ago, but they keep growing faster than the IHT limit and you do not expect to live more than say 7 years is to just give it away and bank on taper relief helping out.

Expert:  bigduckontax replied 2 years ago.
Well, you could always make a gift to charity. That would move it outside the IT envelope!
Expert:  Sam replied 2 years ago.

Hi

 

 

Thanks for your response

 

 

I assumed you were already aware of the IHT exemption for gifts, and were just seeking clarification on what constituted the remit of regular gifts.

 

 

I agree with you totally regarding the taper relief which does go some way to helping the final position on the estate for IHT purposes whilst allowing you to give away what you wish to now.

 

 

 

Thanks

 

Sam

Customer: replied 2 years ago.

Additionally I have used my PEPs to buy annuities which creates excess income I can give away. If I had not done this they would have attracted IHT. The income tax I pay on the annuities is minimal

Expert:  Sam replied 2 years ago.
Hi

Thanks for your response

Yes, that's the problem isn't it, trying to find the balance both with now and the future!

Good luck and thanks

Sam
Customer: replied 2 years ago.

Re bigduckontax


 


Charity begins at home and I would never ever give money to political parties

Expert:  bigduckontax replied 2 years ago.
With respect, I did not suggest giving to political parties, merely to charity.
Customer: replied 2 years ago.

Apologies, I know you didn't but it is on the list of exemptions and no guesses as to why the law-makers put it there! All the more reason not to give them anything.

Expert:  bigduckontax replied 2 years ago.
Plus the fact that indeed some political parties are charities. Some might say some were in need of charity also!

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