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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Can you pass money (£300,000) from property sale to your 2

Customer Question

can you pass money (£300,000) from property sale to your 2 grown up children for their own property purchase without incurring any tax? Could it be classed as an "early inheritance", i.e. without costing them?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 1 year ago.

You won't reduce your CGT charge by gifting the property disposal proceeds to your children but you probably know that.

If you make cash gifts to your children, they will be potentially exempt transfers for Inheritance Tax purposes. Provided you live for seven years after making the gifts, their value will no longer comprise part of your estate. In fact, the potential IHT charge tapers away gradually three years after lifetime gifts are made as you can see here. The only way any IHT liability would fall on your children to pay is if your estate didn't have sufficient assets to settle it. Even then, they would be liable for the tax only on their gifts, not the rest of the estate. The IHT nil-rate band is first used against gifts made in the seven years before death and then if there is any balance against assets held at death.

I hope this helps but let me know if you have any further questions.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you for the answer. The rules appear very unfair; why can't one give a tax-free inheritance below £325,000 to your children just because you are not dead yet?? - especially as there won't be any more inheritance/value/money to be had after that.??
Expert:  TonyTax replied 1 year ago.

The nil-rate band is earmarked for 7 years after the gift is made. After that, the gift is no longer part of the estate and you have your nil-rate of £325,000 band back. You could give away £10 million and pay no IHT so long as you live for seven years after gifting £10 million.

Customer: replied 1 year ago.
Thanks Tony, I do understand. Just don't think that there should be a difference between " free inheritance of £325,000 after death" and to "charging inheritance during lifetime". Basically your kids suffer if you snuff it within 7 years.
Last question: when and which party has to advise the authority about the gift or fund transfer??
Customer: replied 1 year ago.
Hi Tony,could you please let me know your answer to my last question on who has to advise whom about the actual gift/money transfer?
Thanks
Expert:  TonyTax replied 1 year ago.

You don't need to tell HMRC about the gifts but you should keep a record for your executors who will need to know of gifts made in the seven years years before your passing. That's when HMRC are informed.