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Gift of Money to Family - Is There a Gift Tax UK? - YouTube
Channel: Accounting and Tax Academy by Tony D
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if you want to give money to family
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members it's important that you
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understand the potential tax
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implications of making those gifts
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gaining a basic understanding and
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staying within the rules may enable you
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to avoid paying tax on the gift
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altogether in this video we'll be
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covering what actually counts as a gift
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how much can you gift which taxes need
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to be considered when gifting and some
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special rules
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before we get started be sure to hit
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[Music]
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so what actually counts as a gift to
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family members in the eyes of the tax
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man well hmrc define a gift as follows
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anything that has value such as money
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property or possessions or a loss in
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value when something's transferred for
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example if you sell your house to your
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child for less than it's worth the
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difference in value counts as a gift in
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reality it would be very difficult for
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hmrc to keep track of possessions that
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have been accumulated over a lifetime
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and then given away as a gift later in
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life cash or bank transfer gifts on the
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other hand are usually slightly easier
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to identify unless you sleep with all
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your money under a mattress then there
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will usually be some sort of paper or
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digital trail indicating when how and
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where a gift was given and the majority
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of gifts are usually given to close
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family and friends who are also included
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in the will of the donor that is the
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person given the gift so it's expected
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that any gifts received are disclosed to
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the executor of the estate of the donor
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upon their death
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before we continue with today's video
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we're thrilled to be launching the
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accounting and tax academy membership
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site this year we'll be posting
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downloadable resources tax tutorials and
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exclusive courses that you won't find
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anywhere else and the best part of it is
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it's absolutely free to join head to the
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link in the description box below to
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find out more
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[Music]
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if you want to give money to family
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members just remember each individual or
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donor has an annual exemption for gifts
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of 3 000 pounds per tax year this means
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that a grandparent with three
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grandchildren could give them each 1 000
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pounds without having to worry about tax
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be aware that the allowance is 3 000
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pounds in total not per gift or per
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person
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the annual exemption can be carried
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forward one tax year so any unused
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amount from the previous year can also
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be utilized so this can result in a
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maximum exemption of 6 000 pounds in a
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tax share for an individual on top of
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the annual exemption an individual can
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also give away the following gifts each
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tax year wedding or civil ceremony gifts
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of up to one thousand pound per person
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or two thousand five hundred pounds for
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a grandchild or great-grandchild and
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five thousand pounds for a child normal
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gifts out of your post-tax income for
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example christmas or birthday presents
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but you must be able to maintain your
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standard living after making such gifts
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something we'll look closer at in the
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special section of this video payments
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to help with another person's living
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costs such as an elderly relative or
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child under 18 gifts to charities or
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political parties
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and finally providing the person you are
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giving the gift to has not been the
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recipient of one of the exemptions above
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then you can also give as many small
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gifts up to the value of 250 pounds per
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item as you like
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if you exceed these limits and gift
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money to family in excess of your
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allowance then don't worry nobody is
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going to be immediately knocking at your
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door asking for the unpaid tax but it is
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important to know that there may be tax
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liability at some point in the future
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for either yourself your estate or the
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recipient of the gift
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[Music]
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you may be asking why why do hmrc want
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to tax genuine gifts to family members
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well without some form of control and
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gifting limits a wealthy individual
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could simply gift away all of their
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wealth and assets before the end of
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their life and avoid paying any tax at
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all and that tax is inheritance tax
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which is in effect a tax on an
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individual's wealth in line with current
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thresholds inherence tax is a tax
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payable on the death of an individual
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whose estate has a value greater than
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325 000 pounds anything above that
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amount will be taxed at a rate of 40
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percent so how does this fit in when you
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give money to family members when you
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give away a gift in excess of the gift
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allowance detailed above which is three
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thousand pounds per tax share the gift
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is usually considered as a potentially
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exempt transfer or pet for short
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this is because the gift may still be
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exempt from inheritance tax depending on
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when the donor the person who gifted the
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assets dies if the donor of the gift
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lives a further seven years following
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the date of the gift then the gift
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becomes exempt and no inheritance tax is
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payable but if the donor dies within
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that seven year period then something
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called taper relief is applied it is
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also worth noting that under current
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inherence tax rules the threshold of 325
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000 pounds is increased to 500 000
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pounds if the deceased owner is leaving
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a property they own to their children
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including adopted foster or stepchildren
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or grandchildren and the total value of
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the donors estate is less than two
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million pounds
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[Music]
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now there are two special rules that you
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should be aware of number one is that
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any gifts or transfers between spouses
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and civil partners are exempt from the
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inheritance tax irrelevant of the amount
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on the condition that the spousal civil
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partner lives in the uk permanently good
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news for all married couples and civil
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partners
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number two is that there is also a
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differentiation to be made between gifts
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that are made from an individual savings
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or existing wealth and gifts made from
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surplus taxed income
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gifts made from savings or existing
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wealth is what hmrc target as it is
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these type of gifts that would typically
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fall under the inherent tax rules
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however if it's gifts made out of
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surplus income then these may be exempt
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below are some examples of gifts of
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regular payments you might make out of
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your surplus income number one is
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regular deposits into a savings account
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for your child number two is regular
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support payments to an ex-spouse or
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civil partner and number three
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grandparents pay their grandchildren
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schooling fees you may need to
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demonstrate to hmrc that you are able to
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maintain your current standard of living
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following the gift from surplus income
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if hmrc believed that these regular
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payments were an attempt to wind down
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savings income to avoid inheritance tax
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then they would be treated as gifts from
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wealth and be subject to the usual
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allowances and inherent tax rules
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