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Where Taxpayers and Advisers Meet

Money between unmarried couples

Lindo
Posts:2
Joined:Sun Jul 11, 2021 2:43 pm
Money between unmarried couples

Postby Lindo » Sun Jul 11, 2021 3:15 pm

Does regular monthly money allowance given by a partner to the other partner attract inheritance tax.not married but living together, for household costs. And if it does who is responsible for paying it, the estate or the partner?

pawncob
Posts:4753
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Money between unmarried couples

Postby pawncob » Sun Jul 11, 2021 7:41 pm

Up to £3000 pa is exempt (annual allowance)
Larger amounts count towards lifetime exemption. No tax due until person making gift dies, and they fall out of account after seven years.
Tax is due from estate.
With a pinch of salt take what I say, but don't exceed your RDA

AGoodman
Posts:1288
Joined:Fri May 16, 2014 3:47 pm

Re: Money between unmarried couples

Postby AGoodman » Mon Jul 12, 2021 11:05 am

Also, even over £3,000, the gifts could be exempt as regular gifts out of income provided the donor's total expenditure, including the transfers to partner, are less than his/her total income.

Lindo
Posts:2
Joined:Sun Jul 11, 2021 2:43 pm

Re: Money between unmarried couples

Postby Lindo » Mon Jul 12, 2021 11:42 am

Thank you for your helpful responses. What is lifetime exemption? Also what are the rulings regarding who is responsible for paying the IHT bill? When does the recipient pay the IHT tax bill and when does the estate?

AGoodman
Posts:1288
Joined:Fri May 16, 2014 3:47 pm

Re: Money between unmarried couples

Postby AGoodman » Mon Jul 12, 2021 3:45 pm

I think by lifetime exemption, he was referring to the nil rate band (£325k).

In theory (and by default), the tax on gifts is paid by the recipient.

However, in practice, those gifts are usually absorbed by the nil rate band (i.e. are taxed at 0%) so the recipient doesn't pay any tax. The recipient would only have to actually pay if the donor's non-exempt gifts exceeded £325k over the last seven years of their life (in which case they would pay tax on the excess over £325k).

The gifts reduce the nil rate band available to the main estate so, in practice, the main estate ends up paying more IHT that it would with an unused nil rate band.

If the donor is making very large gifts, they can opt to pay the any tax that might arise on the gifts either by deed of covenant or (more often) by a clause in their will.


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