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gifting cash to family

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didleyDi Fri 17-Feb-17 09:29:25

Scottish law. Finding some articles on this bit confusing.
I want to gift 5K each to my four children. I am aged 91 and havn't gifted apart from birthdays/xmas. On my death I estimate, barring unexpected huge expense, my total estate will be around 270 to 300k but some family are of the opinion it might be required to give back to my estate if deceased before 7 yrs.
Advice appreciated

silverlining48 Fri 17-Feb-17 09:40:47

As your estate will be under the inheritance tax limit, think you should be able to gift this amount to your children without a problem but am not an expert, and not in Scotland, but that is my understanding. Maybe others can clarify. I might be helpful to contact Citizens Advice, Age Concern or some other similar organisation to clarify.

Elegran Fri 17-Feb-17 10:07:36

I don't think it ALL has to be given back to your estate before 7 years in any case - but tax will be due on it in that case. on a sliding scale.

THE HMRC has advice -
www.gov.uk/inheritance-tax/overview
www.gov.uk/inheritance-tax/gifts

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year - but only for one year.

If there IS inheritance tax to pay (on estates over the £325,000 threshold) the 7 year rule applies:-

It is charged at 40% on gifts given in the 3 years before you die.
Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

Years between gift and death Tax paid
less than 3 = 40%
3 to 4 = 32%
4 to 5 = 24%
5 to 6 = 16%
6 to 7 = 8%
7 or more = 0%

Gifts are not counted towards the value of your estate after 7 years.

Elegran Fri 17-Feb-17 10:13:05

Scottish law is no different. Your estate will not be big enough to be liable for inheritance tax - though your house may be worth more now than you think.

However, on www.scottishwillservices.co.uk/inheritance.html it says "Note that using your will to create a trust can help reduce inheritance tax liability in Scotland."

silverlining48 Fri 17-Feb-17 11:16:42

With the tax year ending on 5 th april, if you give your children £3000 before then and another £2000 After the 6th, even if your estate is over the inheritabce band of £325 it is tax exempt.

silverlining48 Fri 17-Feb-17 11:17:30

Inheritance band of £325,000 of course.

didleyDi Fri 17-Feb-17 12:07:28

Is this 3K to be divided between daughters?

Many thanks for all replies.

Stansgran Fri 17-Feb-17 14:13:27

No to each child .

didleyDi Fri 17-Feb-17 15:43:56

Extract from Money advice centre.

While you’re alive, you have a £3,000 ‘gift allowance’ a year. This is known as an annual exemption. This means that you can give away assets or cash up to a total of £3,000 in a year without incurring Inheritance Tax.

Norah Fri 17-Feb-17 16:48:40

There are also the gifts that go without notice. Meals out, shopping trips, vacations, gift vouchers, cash payments.

Jalima Fri 17-Feb-17 17:17:05

I don't think it is £3,000 per gift, it is £3,000 pa total and you can give more if it is for a child's marriage.
They don't seem to have increased the amount for some time.

If the estate is under the inheritance tax threshold - including what you have given away over the 7 years - I think it is IH tax free.

Isn't tax the same throughout the UK as tax is not devolved yet?

didleyDi Fri 17-Feb-17 17:26:03

Yes Jalima, that is how I understand the extract. I do know about marriage gift etc. A friend was saying 3K per person but Moneyadvicecentre clearly states 3K in total and can be carried forward for one year making max. of 6K.

Norah Fri 17-Feb-17 17:27:27

It is total, what can be seen, going directly by cheque (for example).

Jalima Fri 17-Feb-17 17:48:06

I shouldn't say this, but who's to say what you spend your money on if you withdraw it a bit at a time?

Anyway, I think it should be all right to give them a cheque without making daily trips to the cashpoint wink

Jalima Fri 17-Feb-17 17:50:20

as well as the £3,000 pa, and I think you can use the last year's allowance if you haven't already used it - ie 2015/16, 2016/17, then 2017/18 on 6th April

annsixty Fri 17-Feb-17 18:01:35

I understand that if it comes of income and not capital it is OK. Is that not the case?.

Stansgran Fri 17-Feb-17 18:07:34

Sorry I made a mistake based on the two of us having two children. You can give one sum of £3000 shared between. £6000 if you didn't give last year. Ignore me.

Elegran Fri 17-Feb-17 18:43:25

From HMRC website:-

Exempted gifts

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year - but only for one year.

Each tax year, you can also give away:

- wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
- normal gifts out of your income, for example Christmas or birthday presents - you must be able to maintain your standard of living after making the gift
- payments to help with another person’s living costs, such as an elderly relative or a child under 18
gifts to charities and political parties

You can use more than one of these exemptions on the same person - for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

didleyDi Fri 17-Feb-17 18:56:29

totally ignored stansgran. Lol., It's a minefield all this business and sad that that's all the amount allowed.

Jalima Fri 17-Feb-17 19:29:15

I think so too, after all it's income on which tax has been paid and if you can't give it to your nearest and dearest if we want to what kind of society are we?

Jalima Fri 17-Feb-17 19:30:23

payments to help with another person’s living costs, such as an elderly relative or a child under 18

what about a child over 18 at university?

Elegran Fri 17-Feb-17 19:37:10

I think you used to be able to do a deed of covenant to pay them £X a year for Y years but that has been abolished. You could give them a gift out of your £3000 a year annual exemption.

Norah Fri 17-Feb-17 19:54:04

Cash for all sort of things goes unnoticed. Meals out, shopping High St, groceries, vacations, gifts at uni, petrol, anything one can cash pay.

Rigby46 Fri 17-Feb-17 22:52:35

This discussion is exactly why I think IHT should be abolished - there are so many ways round it that can go undected if you know what you are doing. And anyway, why the 7 year rule? Basically if you can afford to give any money away and it would benefit someone you care about, then just do it.

Norah Fri 17-Feb-17 23:21:03

The 7 yr rule is to ensure we all pay a fair share of taxes. smile grin

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