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bigduckontax
bigduckontax, Accountant
Category: Tax
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Can you tell me if there is a limit to how much someone can

Customer Question

Can you tell me if there is a limit to how much someone can give to a member of their family in terms of property or money without incurring a tax liability? This is not an inheritance tax issue, but between siblings or possibly a parent and a child of 20. Eg. if my sister owns 2 barns and 7 acres, can she gift me 1 barn and half the land? I am in a lower tax bracket and she earns around 40k. What would be the consequences if any?
Submitted: 1 year ago.
Category: Tax
Expert:  TaxRobin replied 1 year ago.
Hello and thank you for allowing me to assist you.
Gifts and Inheritance Tax are bound together. There is no Gift Tax but the gifts (money and property) one gives are taxed or not taxed depending on many things.
A gift can be anything that has a value, eg money, property, possessions.
Your sister must live for 7 years after giving you the gift. If she doesn’t, her estate or or you will have to pay Inheritance Tax on it.
The amount due is reduced on a sliding scale if the gift was given away between 3 and 7 years before the person died.
FREE EXTRA INFORMATION FOR YOU
If the transfer is a gift and no consideration in money or money’s worth is given then Stamp Duty Land Tax (SDLT) does not normally apply.
Customer: replied 1 year ago.

Thank you, ***** ***** don't understand your final line - the free info one.

Are you saying that if my sister gives me 3.5 acres of land plus 1 barn as a gift that SDLT does not apply? I also don't understand the phrase 'money's worth' - sure the land and barn are worth money?

What are the 'many things' that the gift could be taxed on?Income tax bands, Capital Gains for instance?

Can you tell me if you're based in the UK - I notice your answer was posted in EST rather than GMT? The original expert I was assigned to was ex-HMRC which was ideal, but for some reason I've been re-assigned to you. Not your fault obviously, but I would have preferred a UK based expert.

Expert:  TaxRobin replied 1 year ago.
Hello,
Yes, SDLT would not apply to a gift that is made when no consideration is paid in the form of money or anything that has worth (such as other property).
I am an International Tax Expert not limited to only UK tax situations.
If you prefer a specific UK expert I would be happy to opt out.
That is allowed and I would rather you be pleased and have a confident experience.
Expert:  bigduckontax replied 1 year ago.

Hello, I'm Keith and happy to help you with your question.

Actually your question is much bound up with Inheritance Tax (IHT)! TaxRobin has already told you we do not have a gifts tax in the UK. Thank your lucky stars you don't live in France where gifts tax starts at 5K Euros. There is no limit as to what you may be given. However, any gift creates a Potentially Exempt Transfer (PET) in the estate of the donor for IHT purposes. PETs run off over 7 years at a taper and in the event of decease within that time are added back to the donor's estate for IHT. PETs are the first items to suffer IHT and if the estate is insufficient to meet the tax due then it cascades down to the beneficiary for immediate payment. The classic defence against this is a reducing term life assurance on the donor's life.

IHT kicks in at 325K of assets although this figure is inflated my any charitable and certain other bequests, particularly those of an inter spousal nature. IHT is levied at 40% flat rate on any surplus and the rate falls to 36% if over 10% of the deceased estate is passed to charities. So you see that gifts in the UK are outside the scope of UK taxation save for the latent danger of PETs.

I do hope I have helped you with your query.

Customer: replied 1 year ago.

Thank you for both your responses - much appreciated thank you.

That has given us much food for thought, especially the advice on a reducing life assurance - we've used that in other situations in our family, but it hadn't occurred to us to use it here.Great idea - thanks.

Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance.
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