Inheritence and tax and how much can i be gifted?
I earn about 50k a year and my parents would like to transfer some of their wealth to me. How much are they allowed to gift me per year without me being taxed. Many thanks
There are three types of gift: exempt, non-exempt and potentially exempt.
Exempt gifts are not subject to inheritance tax. Each person can gift £3,000 a year under their annual exemption. Furthermore, gifts from surplus income are also inheritance tax free, provided they are regular and from income not capital. Gifts to charities are also exempt gifts.
Potentially exempt gifts are gifts in excess of annual allowances. Under these, the 7 year rule applies meaning the gift becomes free of tax assuming the person (the donor) making the gift survives 7 years from the date of the gift. If the donor dies earlier then inheritance tax is payable by you.
Non-exempt gifts include gifts to most trusts. These are chargeable to inheritance tax at the time the gift is made, however in practice unless the gift is over £325,000, there is no immediate liability.
You personally cannot be in a situation where you pay tax at the time a gift is made. However, if a gift is deemed non-exempt on the death of your parents, HMRC can come to you for the tax.
The answers above are for guidance only and should not be acted upon without you receiving independent financial advice relevant to your circumstances. To find an IFA please go to http://www.unbiased.co.uk
Danny Cox, Certified Financial Planner, Hargreaves Lansdown
