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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3825
Experience:  FCCA FCMA CGMA ACIS
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I suspect this is not simple but here goes. I have a small

Customer Question

I suspect this is not simple but here goes. I have a small pension and a very low freelance income so pay hardly any tax. I also have an equity release drawdown lifetime mortgage. However, it is possible that in summer 2016 I may be paid what is (to me) a very large sum (up to £100,000) which derives from the possible film sale of one of my late father's books. I have already received a much smaller sum for the film option. As my health is not good, I would like some of this to be paid directly to my 2 children - is this possible and who would pay the tax on this? Also what would my own tax liability be on a lump sum of this kind? Are there any ways of reducing the tax liability? It is not a direct 'inheritance' (both my parents died some time ago and we paid IHT), but it is inherited earnings from my late father's literary estate, of which I am a one-third beneficiary.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. This large sum is taxable in the year of receipt. It should be paid to you net of tax. Direct payment to your children constitutes a payment to you for tax purposes. This money will be aggregated with all your other income and after deduction your personal allowance (10.6K) is taxed at 20% for the first 31785 and 40% thereafter. Making the gift will not reduce your Income Tax liability. It will however create a Potentially Exempt Transfer (PET) in your IHT affairs and in the event of your demise within 7 years PETs, which run off at a taper over the period, will be added back to your estate and the first be subject to IHT. The UK does not have a gift tax regime. Thank your lucky stars you don't live in France where gifts tax kicks in at 5000 Euros! I am so sorry to have to rain on your parade. I do hope that my reply has shed some light on your situation.
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Customer: replied 1 year ago.
Thank you, ***** ***** clear and helpful. But I am rather confused about JustAnswer's payment system. As I do not need to ask another question, presumably this comes under my free trial. But when and how do I cancel the direct debit for £33 a month?
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.
You can continue to ask follow up questions of me on this thread under your free trial. The direct debit membership matter you will have to take up with Just Answer Administration, it is beyond my competence, sorry!.

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