How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Thomas Your Own Question
Thomas
Thomas, Lawyer
Category: UK Property Law
Satisfied Customers: 7472
Experience:  BA (Hons), PgDip, Practising Solicitor
28732269
Type Your UK Property Law Question Here...
Thomas is online now
A new question is answered every 9 seconds

Hello, I am looking to purchase a home (my first) and my

This answer was rated:

Hello,

I am looking to purchase a home (my first) and my parents wish to make me a gift of £50,000 to assist with my deposit. My query is - to what extent will I be liable for tax on this gift?

Thank you,
Kate
Hi Kate,


Thanks for your patience.

You will not be liable for any tax on the gift. It is not income and so not subject to income tax. Neither is cash a capital asset for the purpose of CGT.

However, if this is a genuine gift and nothing is being given to your parents in exchange for it then it will be a Potentially Exempt Transfer for the purpose of Inheritance tax on your parent’s estates.

If they survive 7 years from the date of the gift then none of the value of the gift will be included in valuing your parent’s estates for IHT purposes.

If they pass away between 0-2 years of the date of the gift then the whole of the amount will be included in their estates for IHT purposes. If they pass way between 2-7 years of the date of the gift then only a percentage will be included in the estate for IHT purposes. The relevant percentages are here:-
http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm#4

See “Applying ‘Taper Relief’ to gifts“ on the above link.

Unless otherwise specified, the estate (not you) will bear the burden of paying any IHT payable on the gift.

Please remember to RATE my answer OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE or above if you are satisfied that you have received the correct legal advice (even if it is not the answer you wanted to hear), otherwise I do not receive any credit for answering your question.

If you are not willing to rate my answer as OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE then allow me to assist further by replying asking what clarification you require rather than rating my answer at levels below.

If you wish for me to provide you with further guidance on any question you may have in the future then please submit a further question to the board requesting me either by my profile or by marking your question. “FAO Tom”.

Kind regards,


Tom
Thomas and other UK Property Law Specialists are ready to help you
Hi

Thanks for your patience.

My view is that the “gift” of the property being transferred in to your names would not be regarded as a gift for the purpose of inheritance tax. This is because it was made subject to a life interest in the property in favour of your mother so that she could live there.

This is what is called a “gift with a reservation of benefit” for the purpose of IHT and effectively means that although the property was transferred to you your mother retained a benefit from it (ie. to live there) and as such it is not regarded as a gift for the purpose of it being a Potentially Exempt Transfer (ie. the 7 year rule).

Therefore, I would say that the gift became a “gift” for the purpose of IHT when the property was sold and the money was transferred to you. Therefore the transfer of the monies to you was a new “potentially exempt transfer” and therefore if your mothe passes away more than 7 years from the date the monies were transferred to you then there would be no IHT liability.

If she passes away between r 0-2 years of the date of the monies were transferred to you then the whole of the amount will be included in her estates for IHT purposes and IHT would be chargeable. If she passes away between 2-7 years of the date of the gift then only a percentage will be included in the estate for IHT purposes. The relevant percentages are here:-
http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm#4


See “Applying ‘Taper Relief’ to gifts“ on the above link.

Please remember to RATE my answer OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE or above if you are satisfied that you have received the correct legal advice (even if it is not the answer you wanted to hear), otherwise I do not receive any credit for answering your question.

If you are not willing to rate my answer as OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE then allow me to assist further by replying asking what clarification you require rather than rating my answer at levels below.

If you wish for me to provide you with further guidance on any question you may have in the future then please submit a further question to the board requesting me either by my profile or by marking your question. “FAO Tom”.

Kind regards,


Tom

Related UK Property Law Questions