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Where Taxpayers and Advisers Meet

Annual Gift Allowance

Joined:Wed Aug 06, 2008 3:33 pm
Annual Gift Allowance

Postby CG » Sun May 30, 2021 5:57 pm

Hi, I wonder if you can help me with some advice about the annual gift allowance of £3,000.

My parents are wanting to help my sister in law pay for her cancer treatment where she lives in Bulgaria. They are elderly so are concerned about the possibility of her being liable to inheritance tax on this. I have read that if the annual allowance was not used in the previous tax year it can be carried forward but must be spent in the next tax year.

Am I correct in thinking that this means both of my parents (if they made no gifts in 2020-21) could give up to £6,000 each and none of this could become subject to inheritance tax.

Many thanks for any advice you are able to give me.

Joined:Mon Aug 17, 2020 10:54 am

Re: Annual Gift Allowance

Postby Samson22 » Sun May 30, 2021 10:05 pm

You are correct provided they have not given OVER 250 to any one individual.(uncanny those allowances were set back in 1981 and not increased since.

Joined:Fri May 16, 2014 3:47 pm

Re: Annual Gift Allowance

Postby AGoodman » Mon Jun 07, 2021 7:24 pm

This is not quite the right way to look at this.

Any gifts they give in excess of the £3,000/£6,000 will be potentially exempt transfers so brought into account for tax only if they fail to survive 7 years. If they survive 7 years, they are completely ignored for inheritance tax.

However, you also have to remember that:

- a married couple would only usually pay inheritance tax if their combined estates are more than £1m, allowing £350k for a home and £650k for everything else including gifts made in the last seven years.

- if they do not make a gift and die within 7 years, the money is still taxable - you have not saved any inheritance tax by holding onto it.

- the recipients of the gifts are only subject to tax (rather than the estate paying it) if a deceased makes gifts over £325k in their last seven years.

In summary, if you make a cash gift, it may be taken into account for tax but if you hold onto it, it is definitely taken into account for tax.

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