IHT Exemption - Gifts from Income

[Jayfn]

My wife and I have a joint bank account

 

I have monthly SO’s set up for my grandchildren for regular Pocket money...

I want it to be arranged as payments from me,

although coming from a joint bank account(the contents of which is mainly my monthly pension fund payments).

i.e to be seen as gifts from My income for Hmrc purposes.

 

If I get my wife to write and sign a note/letter for my records,that this is the case(the SO’s are from me and not from jointly or her) would this suffice for HMRC?

[Mr.P]

If the total value of the gifts to the grandchildren do not exceed £3000 in total each year, there would be no inheritance Tax issues. In addition, if the value of your estate falls below the IHT threshold (currently £325,000), there wouldn't be any tax to pay anyway.

 

From a joint account, with your wife's consent, you could increase the total gifts to £6000 each year by combining both your annual allowances. This link provides some information on the subject: https://www.saga.co.uk/magazine/money/personal-finance/giving/tax-and-gifting-money-to-children

[Jayfn]

I am aware of annual gift allowances and IHT thresholds,but I want to be specific wrt gifts from income!

[honeybee13]

Hi.

 

Is the small gifts allowance of £250pa per person enough to cover what you're doing?

 

I'll check the HMRC website for gifts out of income, but you may need to ring them with your specific question about the joint account. They're very helpful on the phone.

 

HB

[Jayfn]

Tried writing to them 6months ago,but still waiting for reply...not expecting anything now!

Small gifts doesn’t help....thanks.

[honeybee13]

This is what the HMRC website says about gifts from normal income, but I think there may be more to it than this. I wonder if it might help to set up your own bank account so the gifts can be shown to be just from you, but as I said you probably need to check with the Revenue or talk to an accountant.

 

https://www.gov.uk/inheritance-tax/gif

 

HB

[honeybee13]

Tried writing to them 6months ago,but still waiting for reply...not expecting anything now!

Small gifts doesn’t help....thanks.

 

You could try ringing.

 

HB

[Jayfn]

Thanks...I might wait a little longer for postal reply...would like answer in writing.....

 

I know I can open a sole bank account,but I have been making these regular gifts from joint acc. for a few years now,...so was wanting to cover this if possible.,...and thought a letter,as mentioned might cover it.

[Jayfn]

With the knowledge that £3k can be gifted annually(not from inc.but as annual allowance),..would the following gifts be acceptable by HMRC as gifts from income...Yr.1 Dec, gift is £5k,but want £4k to be regarded as g f i;Yr.2,May,gift is £4k,Yr.3 July,gift is £6k,but want £4k to be regarded as g f i.   My claim would be regular gifts of £4k made each tax year but in different months in that tax year. 
Would HMRC regard these gifts £4k as regular gifts from income?

[honeybee13]

Hi. I've merged your new thread with an old one about gifts out of income.

 

My understanding is that gifts from income are OK as long as they don't affect your standard of living, but that may not be what you're asking.

 

In terms of the timing, I don't know if anyone here will be able to answer your question but I could be wrong. Did you get round to speaking to a lawyer or accountant about this?

 

HB

[Jayfn]

I’m aware that when gifting from income, my normal standard of living should not be affected.

This post is different from previous posts,...and I have not discussed with lawyer/accountant.

[honeybee13]

Well, see what replies you get but I think you may need professional advice about the timing of the payments.

 

Something I don't understand is how HMRC are meant to know about the gifts you made in past years.

 

HB

[honeybee13]

Parts of this article could be useful.

 

https://www.thisismoney.co.uk/money/pensions/article-5753831/How-avoid-inheritance-tax-giving-away-money-surplus-income.html

 

HB

[AndyOrch]

Topic moved to  Benefits and HMRC Forum....please continue to post here to your thread.

 

Andy

[slick132]

Further to the advice from Honeybee, this may be more focused advice about gifts out of income - https://www.gov.uk/inheritance-tax/gifts

 

Have a look at this which gives good guidance.

 

If you have further Q's, let us know.

 

If you want tax planning advice beyond the HMRC guidance, you need to speak to aN IHT tax planning accountant or solicitor.