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bigduckontax
bigduckontax, Accountant
Category: Tax
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I want to give my daughters £10,000 each. They are both in

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I want to give my daughters £10,000 each. They are both in their 20s. The eldest is getting married this year. Do they have to pay tax on this gift? Can I claim income tax relief on this gift? My husband also wants to give them some money. What would be the position on this?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question. Please remember to count me in on such largesse [Joke].
Gifts are outside the scope of UK taxation. Thank your lucky stars you don't live in France where gifts tax kicks in at 5K Euros!
The tax problem with gifts rests with the donor and to a lesser extent with the beneficiary. Gifts create a Potentially Exempt Transfer (PET) in the Inheritance Tax (IHT) of the donor. PETs run off at a taper over seven years and in the event of the donor's decease within that time are added back to their estate for IHT purposes. PETs are the first to suffer IHT and should the deceased's estate be insufficient to meet the tax on PET the liability cascades down to the beneficiary for immediate payment. The defence against a PET is a reducing term life insurance policy. IHT kicks in at 325K at a flat rate of 40% on the excess.
Some gifts escape this system. Here is the Which advice on the subject. You will see that should you give your spouse 5K [inter spousal gifts don't count] and he gives 5K to your daughter you ditto then these would be within the permitted range and no PET would kick in.
'Gifts made as part of your ‘normal expenditure’ This exemption allows you to give away money from surplus income, providing the gift doesn’t reduce your standard of living, is not from capital and forms some pattern of regular spending. A good test is if the money comes from your current account.
Gifts to people getting married Up to: £5,000 from each parent of the couple;
£2,500 from each grandparent or more remote relative;
£2,500 from bridegroom to bride (and vice versa) and between civil partners; £1,000 from anyone else.
Any number of gifts up to £250 to each recipient These gifts are meant to cover things such as birthday and Christmas presents.
Gifts for maintenance Of husband, wife or civil partner, ex-husband, ex-wife or ex-civil partner and relatives dependent on you through old age or infirmity.
And for maintenance, education or training of your children (including step and adopted children) in full-time education or aged 18 or under.
Gifts up to £3,000 in total in each tax year You cannot combine these with a £250 gift to the same person. Husbands, wives and civil partners each have 3,000 limit. You can carry any unused part forward one year only, to the next year. This gift is known as the ‘annual exemption’.'
So there you are, a loophole to clear your eldest's yardarm altogether, but the others will have PETs created.
There is no income tax relief available on such transfers, a small shower on your parade, sorry. Otherwise I do hope I have helped you with your query.
Gifts, no tax, but beware of the PET!
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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