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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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A friend in the US is giving me in the region of £70k. This

Resolved Question:

Hi. A friend in the US is giving me in the region of £70k. This is not a loan as there's no requirement to pay back. How would I treat this from a tax point of view as I an self assessment. Also, what's the most tax efficient manner of dealing with this ie is there a tax liability if it's put direct into my pension fund.
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.

The UK has no gifts tax regime so this 70K comes to you tax free. Just warn your bank of incoming funds and their source to preclude any money laundering inquiry a large sum might attract. A gift does not have to be declared on your self assessment although any interest earned from its deposit is liable to Income Tax (IT) in the normal way and you will have to note it on your return. If you put in say a SIPP or indeed any other private pension then watch out for the annual limit, currently 40K, but with a SIPP you can go back three years to mop up any unused contribution levels. You do not need to use such tax avoidance anyway as I have told you the receipt of this sum is outside the scope of UK taxation.

I do hope that I have set your mind at rest on this matter.

Customer: replied 1 year ago.
Hi Keith. Is the tax free status because it's coming from the US?
Expert:  bigduckontax replied 1 year ago.

No, it is tax free because it is a gift. The same would apply to any gift world wide, tax free.

The sun has got his hat on, hip hip hip hooray!

Customer: replied 1 year ago.
Thank you. I was under the impression that you could only gift a certain amount a year tax free provided you survived for 3 years.. I'm thinking more around inheritance tax I think.
Customer: replied 1 year ago.
Also, do I need him to write a letter outlining that it is a one off gift. Thank you.
Expert:  bigduckontax replied 1 year ago.

I think you are concerned about the seven year rule for UK gifts which can spill into the donor's Inheritance Tax (IHT) over that period. This does not apply to an US resident citizen or their gifts.

Yes it is a good idea for the gift to be evidenced in writing just in case of inquiries.

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Customer: replied 1 year ago.
Thank you very much.
Expert:  bigduckontax replied 1 year ago.

Delighted to have been of assistance.

Please don't overlook my rating.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.

Thank you for your support.