Gift of Money to Family - Is There a Gift Tax UK?

Gifting or leaving money to family members is a natural part of ensuring your loved ones are provided for, but what about gift tax?

Accounting & Tax Academy Free Membership Site →

Chapters:
0:40 What counts as a gift?
2:05 How much can you gift?
3:47 The taxes to consider, including inheritance tax.
5:20 Special rules to take into account.

In the UK, as of the date of this video, everyone is entitled to a £3,000 annual tax exemption when making tax gifts to family members. This includes children and grandchildren. It's important to note that this is £3,000 in total and not per gift. So for example if you're a grandparent with 3 grandchildren you could gift them each £1,000 without paying any tax, not £3,000 each.

The annual exemption can be carried forward one tax year so any unused amount from the previous year can also be utilised. This can result in a maximum exemption of £6,000 in a tax year for an individual.

On top of the annual exemption an individual can also give away the following gifts each tax year:

• Wedding or civil ceremony gifts of up to £1,000 per person or £2,500 for a grandchild or great grandchild and £5,000 for a child
• Normal gifts out of your post tax income, for example Christmas or birthday presents but you must be able to maintain your standard of living after making the gift, something we’ll look closer at in the special rules section of this video.
• Payments to help with another persons living costs such as an elderly relative or child under 18
• Gifts to charities or political parties

And finally, providing the person you are giving the gift to has not been the recipient of one of the exemptions above then you can also give as many small gifts up to the value of £250 as you like.

Inheritance tax is the main tax to consider when gifting money. We go into a lot more detail about this in the video, however, the basics of inheritance tax is that if your estate is worth over £325,000. Remember, inheritance tax would not be charged on that £325,000, but anything over this amount. It's also worth noting that, as of the date of this video, this £325,000 threshold is increased to £500,000 if you are leaving property to children or grand-children and your estate is worth less than £2M in total.

When you give away a gift in excess of the gift allowance detailed above (£3,000 per tax year) the gift is usually considered a potentially exempt transfer or PET for short. This is because the gift may still be exempt from inheritance tax depending on when the donor, the person who gifted the assets, dies. If the donor of the gift lives a further 7 years following the date of the gift then the gift becomes exempt and no inheritance tax is payable but if the donor dies within that 7 year period then something called taper relief is applied.

We hope this video has given you more of an understanding about the way gifts and inheritance is taxed in the UK and taken you closer to knowing your numbers.

★☆★ OUR MISSION ★☆★
Me & my team are dedicated to helping and empowering YOU to 'Know Your Numbers' so you can make calculated and informed decisions in your business, company and personal finances towards your definition of success.

★☆★ OUR PHILOSOPHY ★☆★
If you take care of your numbers (finances), your numbers will take care of you, your family and those you value the most.

🔴 DISCLAIMER
Our videos are for general guidance, education and empowerment in helping you understand accounting, tax and your numbers. They in no way constitute specific advice to your specific circumstances. Me & my team would be delighted to help you with your specific queries or accounting requirements through a formal engagement.

#inheritancetaxuk #gifttax

[tonydCFO]

If you gift money or items with a monetary value to family members, what are the potential tax implications? Something you should be aware of.

Time Stamps:
0:40​ - What counts as a gift?
2:05​ - How much can you gift?
3:47​ - The taxes to consider, including inheritance tax.
5:20​ - Special rules to take into account.

[stephenmatura]

HMRC's generosity knows no bounds!

[encouragesolutions]

Surely in many cases the gift money has already been taxed via salaries earned over the years, so this inheritance tax or gifts are double taxation? Exception would be property appreciation. Income from investments similarly would be taxed via annual tax declaration and also be double taxed ? Doesn't seem right?

[robba]

This was interesting, but as you say, HMRC has great difficulty tracking individual "spending, " so a cash gift is difficult if not impossible to track, Being honest who keeps receipts of day to day cash spends? However, the cashless world we are running towards would be very helpful to our greedy little tax man, who ignores billionaires and international corporate business avoidance schemes (yes, Amazon, I'm looking at you, and Apple of course)

[StephenTurner-om]

I give my sons money regularly, it's my money and no one elses business,

[stevelangridge]

Hi. Very good, thanks. Where are the declarations of gifts made and by whom and how are they tracked?

[tarakkhandakar]

Hi there, quick question, my dad passed away in 2016 leaving a property worth 800k (Didn't use his tax allowance of 325k, now if my mum sells the property and gifts the money away to us siblings as cash, will there be tax to pay still as its cash from the property sale? As in can we add dad's "unused" tax allowance to mums £500k threshold? Thanks.

[natsudragneel]

But... he didn't explain how much tax you have to pay. He said there are no taxes for gifts below 3000 pounds a year. Ok, but if you have gifts above 3000 pounds a year, then, what's the tax?

[geoanderton]

Am I not correct in thinking that gifts from income do not attract tax. I have a substantial shareholding in an ISA and gift the dividend cash to family as it surplus to my requirements in my old age.

[razachaswills]

I contacted a solicitor recently who told me that it was NOT a maximum of £3000 per person per year; it was a maximum of £3000 per year that I could give. Meaning that with say, 6 friends or family members, the maximum I could give to them all, would be £500 each! That came as a big shock to me. Until then I had assumed it was £3000 per person. I would love to hear someone tell my that I was correct in my assumption, and the solicitor was wrong, but I doubt it.

[gordont]

Great video, thanks. One quick question. If a married couple give regular gifts from their joint bank account, is it assumed that the gifts are 50% from each?

Finally, any information on the use of trusts to protect family wealth, including Flexible Reversionary Trusts, would be of interest.

Thank you.

[JamesWilliamson-wy]

Depends how you gift it. If it's in the form of Gold legal tender coins then it's free of all taxes. Let them convert the gold into cash as that's also tax free.

[allenwoodward]

Hi you say

“There is a differentiation between gifts from savings/wealth and gifts from surplus taxed income, which may be exempt”

So if I give a gift from wealth what exactly is wealth? Is this not the same as giving a gift from surpluses tax income?

Thanks

[kalu]

Hello Tony, Thanks for the videos. Very useful. I have a question. Can I gift money to my son who lives in UK. I am a tax resident in India. Purpose is to help him buy an apartment in UK

[Volvo-kw]

Be aware, if your gift money to a family member to help them with a house purchase you will need to conclusively prove where the money came from also - and the solicitors handling the purchase will likely charge the buyer for the privilege of ‘satisfying their legal obligation to money laundering legislation’. Cost my daughter an extra £120 in legal fees!

[marianocamerlingo]

Thank you for your valuable content. How much would let's say a gift of 5k above the 3k threshold be taxed? Thank you

[eredison]

Hello there.Mother passed away a year ago.My sister and her family live there.Its now up for sale and I believe we have a buyer.My sister owns 55 per cent and I own 45 per cent.The property will sell for £530, 000.After expenses, will there be any taxes that I have to pay, as this money will go towards me buying a house to live in?Kind Regards, E.Edison

[jf]

“If the donor of the gift lives a further 7 years following the date of the gift, then the gift becomes exempt and no inheritance tax is payable. But if the donor dies within that 7 year period, then something called taper relief is applied”.
Please review this statement as I think it’s very misleading. If the donor dies with 7 years, then the WHOLE AMOUNT of the gift is subtracted from the £325k. So that’s a real and ghastly cliff edge with no Taper Relief. Taper Relief is sometimes applied but only after the £325k is exhausted.
So unless the total gifts exceed £325k, there is no relief whatsoever. Worse, it’s possible that gifts to friends are effectively taxed against the beneficiaries of a Will; perhaps quite different people.
Just saying…😢

[kimballentyne]

What happens if a sibling has NOT returned an outstanding £200, 000 property IOU from our late mother more than 7 years ago and the sibling has probably NOT notified UK HMRC, and what happens if the sibling has stolen from our late mother's Spanish bank account?

[muhammadsaeed]

If I send money to some one out side family (living in UK) as a gift, lets say 5000 to 10, 000 £ . Will the receiving person face tax?