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Where Taxpayers and Advisers Meet

Tax on lump sum

Speedo175
Posts:1
Joined:Wed Jun 07, 2017 12:15 pm
Tax on lump sum

Postby Speedo175 » Wed Jun 07, 2017 12:25 pm

I have close friends whose 5 year old daughter has been diagnosed with an incurable illness that will unfortunately take her life in the next few months. As Dad is self employed, what would I have to do to gift a sum of money tax free so that he doesn't have to work during these difficult times?

I am a full time employed UK taxpayer and my wife is a full time Mum.

My wife and I have not given any cash gifts in the last year, so I am assuming that we could legally give a gift of up to £24000 tax free if:
- I gift £6000 to friend + I gift £6000 to friend's wife + my wife gifts £6000 to friend + my wife gifts £6000 to friend's wife

OR

- give one lump sum and hope not to die in the next 7 years thus not being liable for inheritance tax?

Naturally I will record all necessary details so that the gifts are transparent, but ultimately anything I do I want to ensure that I fully comply with tax rules.

I thank you in anticipation of any advice you could kindly provide.

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Tax on lump sum

Postby LozaACCS » Sat Jun 17, 2017 7:59 am

You can legally gift any amount of cash you choose, the only tax issue will be IHT.
I do not recognise the basis for your calculations, both you and your wife can gift the annual exemption for the current and preceding year (if unused).
The AE is £3,000 per annum, gifts between spouses are exempt, (there is a restriction if the donee is non UK domiciled, this does not appear to be the case here).
On this basis the maximum would appear to be 12K (6K each by yourself and your spouse), anything in excess would be a PET subject to the 7 year rule, there might be capacity for further amounts by utilising section 21 (normal expenditure out of income, this would require an intention to make regular future gifts and meet the other conditions for section 21.


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