Parent to Child Money Gift...Laws?

Yes. There are rules that cover IHT liability. Giving regular gifts from income is OK as are certain kinds of one-off gifts (e.g., on getting married). If he lives seven years after the gift was made then IHT shouldn't be a problem.

Rather than take my advice read the inland revenue leaflet on the subject (as it is very clear):

I assume you are over 18? If so, it's IHT which could potentially apply.

Bitstring , from the wonderful person Jennifer said

Not if he survives for another 7 years no. If he dies the estate may be liable for inheritance tax, at the time of his death ("IHT" .. google for the rules, the IR has them posted somewhere). This is for large sums. he can give you £3k/year with no liability at all, with a 1 year carry back (so if he didn't give any away last year, he can give 6k this year) .. assuming he's not been giving any to someone else that is.

Thanks to everyone for the replies. Yes I am over 18. Am I reading this right, that if my Father gave me money (>3000) and he passed away withing 7 years I would get taxed at 40% of the sum? or is it 40% of the taxable amount?

thanks, Jen

No, it's his Estate which has to pay the IHT (if any).

However, if you are the sole beneficiary, that could mean that you will receive less from the Estate.

Bitstring , from the wonderful person Jennifer said

In message , GSV Three Minds in a Can writes

The recipient of the PET has to pay the IHT that is due on the PET.

What you say is true, but where a PET is within the NRB, no tax is due thereon, and so the recipient has to pay nothing even if the remaining estate leads to a substantial IHT bill.

If widow Meryl has a £500k house and loadsa savings, and gives most of the cash (an amount equal to the NRB) to daughter Beryl but leaves the house to her other daughter Cheryl, and the remaining cash to charity, then poor old Cheryl has to find £200k to pay the IHT on the house (or sell it), but there is no obligation on Beryl to pay anything.

I seem to remember telling you that in about 1997!

And I've remembered it right all this time? I think I deserve a gold star.

Not quite: the gifts aren't tapered, it's the tax on the gifts that is tapered. If the gifts total less than the nil band (as is usually the case) the taper has no effect. R

not quite: following a recent change in the rules, she can pay the that 200k tax spread over 10 years at a very reasonable interst rate (3% p.a. at the moment). This applies only to the tax on the deceased's house, not other things. They grant probate after the first 10% installment has been paid.

This gets people out of the nasty situation: they can't pay the tax util they have sold the house; they can't sell the house until they were granted probate; they can't get probate until the tax had been paid.

Robert

They grant probate before any tax on the house is paid (at least they did in March this year).

"stuart noble" >first 10% installment has been paid.

Interesting. It is amazing that they will, in effect, grant you 10 year repayment mortgage at a 3% interest rate.

Is there any adantage at all to be had by taking an equal sized mortgage to pay off the IHT?

Robert

OK, so all this house talk has made me think of another question....my Father owns his house (Mother is deceased). He wants to leave the house to me..is it better that he puts me as a co-owner or something on the house now?

thanks, Jen

Only if once you co-own it you will also co-use it (either live there or rent out "your" room(s) to lodgers), or else if he pays you rent for his deemed use of your half.

Otherwise the gift will be a GWR instead of a PET and so will never qualify under the 7 year rule and will bring no IHT avoidance benefit.

Thanks again to all the advice. The house talking has got me thinking about another question....my Father wants to leave me the house (to myself and my sister). My Mother is deceased - what's the best wat to do this...put our names as co-owners of the house now or just leave it to us? thanks, Jen

"stuart noble" >first 10% installment has been paid.

In message , Jennifer writes

Sop long as his estate is less than £263k then leave it to you.

He can change his mind about his will at any time. He might later decide not to leave it to you after all. Once you are a co-owner he can't change his mind and leave it to someone else.

Watch out for capital gains tax on your share of the house if he does give it to you.

Robert