The bank of Mum and Dad is being used more and more these days for University fees, house deposits etc, but is this cash tax free?
Is your estate below £325,000 (£650,000 if married or civil partnership)?
If so, then yes – any gifts are tax free!
If your estate is over £325,000 (£650,000 if married or civil partnership) you can still gift…
Up to £3,000 each tax year to your children or anyone else without it being added to your estate.
Special occasions such as a wedding or civil partnership, Parents can give up to £5,000 to your children, £2,500 to your grandchildren or great-grandchildren, and £1,000 to anyone else.
Small cash gifts are also exempt, and each year you can give up to £250 to as many people you like without paying inheritance tax.
How much tax will I pay on gifts above the thresholds?
If you give away more than stated above it will be clawed back into the estate upon your death and taxed as follows:
If you gift and pass away within three year’s then 100% will be clawed back and tapers for inheritance tax purposes and taxed at 40%.
3-4 years 32%,
4-5 years 24%,
5-6 years 16%,
6-7 years 8%
7 or more years 0%
Gifts made over 7 years ago are not counted as part of your estate.
Mum and Dad… if you’re reading this, I could do with a new iPad?
