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bigduckontax, Accountant
Category: Tax
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My parents want to give some money to their grandchild (currently

Customer Question

My parents want to give some money to their grandchild (currently only a year old). They want to give him around £30k. They are open to giving the amount over a greater time period, broken into smaller amounts, if that works out better.
They are both pensioners.
Whats the most efficient way of doing this, whilst paying the least amount of tax?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years 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 gift tax regime so gifts are outside the scope of UK taxation. Thank your lucky stars you do not live in France where gifts tax kicks in at 5K Euros! Making a gift of say 30K does have an effect on your parents' Inheritance Tax (IHT) position. The gift creates a Potentially Exempt Transfer (PET) in their IHT affairs. PETs run off at a taper over seven years and in the event of decease within this period are added back to the donor's estate for IHT purposes. IHT kicks in at 325K (plus any inter spousal or charitable bequests) and is at 40% flat rate. PETs are the first to suffer IHT and in the event of the donor's estate being insufficient to meet the IHT on the PET the liability cascades down to the beneficiary for immediate settlement. That is the only risk and the classic defence is a reducing term life insurance policy; I appreciate that premiums may be prohibitive depending on your parents' age.! I do hope that I have shed some light on the position