parental gifts?

[tinkerbell]

One of my relatives wishes to give me a large sum of money. What is the threshold for IHT or CGT?

[Arnold Aaro]

There is no income tax or CGT on receiving the gift.

However, provided the donor has no future rights to the gift, and he/she lives for 7 years the gift escapes Inheritance Tax (IHT) as well.

If the donor passes away within 7 years there may be IHT on his/her estate depending on the value of the estate.

The rules in the current tax year are:

First: Nil Rate Band - £275k of the estate taxed at 0%
Everything in excess of this is taxed at a flat rate of 40%.

Your relative should be aware that on death any gifts made within the last 7 years come back into the estate first, and this normally takes up the nil rate band first, and then the rest of the assets are added up to value the estate. Any outstanding loans are deducted from this figure too to reduce the estate.

There is a way to make gifts that you may be interested in which gets around these rules, at least partially.

See my response in this link to find out how:

http://www.taxationweb.co.uk/forum/discuss.php?id=5271

Don't hesitate to come back to me for more info,

regards,

Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail: arnold.aaron@zurichadvice.co.uk
Tel: (office) 0208 437 2500 (m) 07957 440 724

[I advise on Inheritance Tax Planning, and specialise in Discounted Gift Trusts and Investments]

[tinkerbell]

Thats great, thank you. I was considering turning down the gift because of the Tax!! One more question if thats ok? If i use that money to buy a property in a Non-EU country will i be liable for anything? and what if that country subsequently joins the EU?

[Arnold Aaro]

EU doesn't have much to do with it I'm afraid.

If you buy a Property abroad you my be taxed on the rental income either in the UK or the country of the property or both. It all depends on taxation agreements between the Uk and other nations. Also there may be tax when you eventually sell the Property if you have made profit on it.

You could ask a quesiton here in the international tax forum for more specific guidance.

Alternatively, if you are thinking of investing the money here in the UK, I would be happy to advise you on all tax free and tax efficient schemes, as I specilaise in investments, so don't hesitate to call.

regards,

Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail: arnold.aaron@zurichadvice.co.uk
Tel: (office) 0208 437 2500 (m) 07957 440 724

[I advise on Inheritance Tax Planning, and specialise in Discounted Gift Trusts and Investments]