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Where Taxpayers and Advisers Meet

Income tax on regular gift payments?

mercexe
Posts:2
Joined:Thu Apr 01, 2021 1:48 pm
Income tax on regular gift payments?

Postby mercexe » Thu Apr 01, 2021 1:52 pm

I am employed under PAYE and also have a second job as a sole trader.

If I were to employ my Mother to work for my sole trader business (she is a basic rate tax payer) and pay her £1k/month (she does actually work for sole trader business; this would be genuine employment) and then she were to gift me £1k/month would the £1k/month I receive back from my Mother be tax-free on the basis it is a gift?

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Income tax on regular gift payments?

Postby pawncob » Fri Apr 02, 2021 3:51 pm

Yes, but only up to the annual exemption (£3k) or from disposable income if it's surplus to needs. Any excess would be a PET for IHT purposes.
With a pinch of salt take what I say, but don't exceed your RDA

mercexe
Posts:2
Joined:Thu Apr 01, 2021 1:48 pm

Re: Income tax on regular gift payments?

Postby mercexe » Fri Apr 02, 2021 6:00 pm

Thanks, so no income tax implication?

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Income tax on regular gift payments?

Postby darthblingbling » Fri Apr 02, 2021 7:03 pm

Probably not, but you'll need to do this through a payroll which will probably incur some Secondary Class 1 NIC costs even if she's over the state retirement age. May also be some admin costs if you don't already operate a payroll and need to register as an employer. May be some auto enrollment admin too.

Also given the low salary and the fact you've stated that she does actually do work, likely not an issue, but HMRC may argue that the income is not commensurate to the role. But as mentioned this is likely very low risk.

Does she have any other employment or income?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Income tax on regular gift payments?

Postby maths » Sat Apr 03, 2021 1:44 pm

Assuming, as seems to be the case, that you agree to pay mother who agrees to give you monies she receives back to you then it is highly likely that you will be denied a tax deduction for your payments; whole thing a bit circular.


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