Is there a gift tax?

[SouthWest_1984]

Hi there,

My parents may be looking to help me out in purchasing my first home which could mean them offering me 10k. Is there such a thing as gift tax, or can they only give me so much a year?
I have read somewhere that you can give as much as you want, but if the person giving the money dies within a 7 year period the money goes back into the estate and is applicable to interhertance tax, if over the interhertance tax limit.

I look forward to your replys

Regards

[Lee Young]

If neither have made any gifts in this tax year and indeed made none in the last tax year then this gift of £10k, half each, will be covered by their two annnual exemptions from inheritance tax (which is our gift tax for these purposes). Otherwise yes it stays on their clock for 7 years and if they were to die within that period their share of the overall gift is deemed to be in their death estate for determining whether or not inheritance tax is payable at that point.

[SouthWest_1984]

May I ask what that annual allowance is? So even if they wanted to give say 20k, and it was not covered in their allowance they still could give it, but then the 7 year clock applies?

[Lee Young]

£3,000 per year.

Yes - a gift of £20,000 would leave (applying my assumptions above) £8,000 on the clock, £4,000 each.

Ultimately you can give away as much as you can afford, but whatever exceeds the annual exempt amount will be deemed to still be in your estate for 7 years. Otherwise just before we die we'd give the lot away and there would be no tax at all.

[adavidson]

Is the person giving the gift required to notify the tax authorities about the amount or is it sufficient to make a record of it for inheritance tax purposes?

[Lee Young]

Just keep a record of it. NO notification required now, just by the prs if you die within 7 years.