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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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years before my mother's death last year, she gave me

Resolved Question:

For 7 years before my mother's death last year, she gave me annual gifts. She lived in the USA, and the gifts were below the limit liable for tax there, but the limit here is much lower. I am a dual citizen and fill in tax returns in both countries. So the gifts will have escaped tax in the US, but will I have to declare them on the UK tax form?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

When you refer to the "UK tax form" do you mean your personal self-assessment tax return?
Customer: replied 2 years ago.

Yes.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

Fine. Thanks.

Expert:  TonyTax replied 2 years ago.
Hi again.

The recipient of a gift doesn't pay tax on it in the UK and there is no need to report it in a self-assessment tax return, though it makes sense to keep a record so that you can say where it came from if asked. Such gifts are what are called potentially exempt transfers which will form part of the donor's estate for Inheritance Tax purposes if they do not live for seven years after making them.

Take a look here for information on Inheritance Tax and who pays it. If your mother was UK domiciled, then her worldwide estate would potentially have been liable to UK Inheritance Tax if it exceeded the nil-rate band in value. If she was not UK domiciled, only her UK based estate (excluding UK bank accounts denominated in other then UK Pounds) would have been potentially liable to UK IHT.

The nil rate band for a widow or widower can be increased if the executors of the spouse who died first did not use all the nil rate IHT band available to theie estate,.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

The info says:

The estate doesn’t pay Inheritance Tax on up to £3,000 worth of gifts given away by the deceased in each tax year (6 April to 5 April). This is called the ‘annual exemption’.

However, my mother's gifts were £5,000 per year, so over the UK threshold, but under the US threshold. My tax home is the UK.

Expert:  TonyTax replied 2 years ago.

The excess of each gift over £3,000 would have been a potentially exempt transfer. Where all or part of a £3,000 exempt gift allowance isn't used it one tax year, it can be carried forward one year so there is potentially £6,000 of exempt gifts that can be made in the later year. If the gifts were made from outside the UK, then they would not be caught by the UK IHT system in any event, assumibng your mother was not UK domiciled.

None of the above affects your personal tax situation.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15846
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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