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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I wish to help fund my daughter through an Msc 2 year study.

Resolved Question:

I wish to help fund my daughter through an Msc 2 year study. If I transferred say between £5,000 - £10,000 a year, from my own tax paid earned income, by monthly instalments by standing order, is she liable tax on that?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Any money you give to your daughter to help her get through her Msc will be treated as a gift for tax purposes and she will not have to pay tax on it.

Take a look here for information on gifts that are exempt from Inheritance Tax and for information on Inheritance Tax generally. You can use the annual £3,000 exemption to cover some of your annual payments to your daughter. So long as you haven't used the £3,000 allowance from the previous tax year as well as the current tax year, you can gift up to £6,000 in the current tax year IHT free. The balance of each annual gift will fall out of your estate for IHT purposes so long as you live for seven years after making it.

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

I am currently funding her on the same basis to the extent of £500/month while she has had to take lower paid work, after leaving her teaching job. She hopes to get on the Msc Sep 2016, which will then be full time education and exempt. Is she liable for tax on the £500/month now?

Expert:  TonyTax replied 2 years ago.
No, she won't be. Cash gifts are not taxable as income in the hands of the recipient.

As an afterthought, if you can show that the monthly payments do not impact on your lifestyle, they can be treated as payments out of income as opposed to capital in which case there will be no IHT implications for your estate.
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