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Sam
Sam, Accountant
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How much can I gift to my children each year and I also want

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How much can I gift to my children each year and I also want to buy Income onds in both our name but I get the intrest and pay the tax on the amount I receive, but on my death the bonds go to my children is this ok
Submitted: 4 years ago.
Category: UK Tax
Expert:  Sam replied 4 years ago.
Hi

Thanks for your question

You can gift as much as you like to your children - but whether it needs to be considered for Inheritance tax may be the issue here.

This being the case - any gifts you make each tax year which total £3000 or less are exempt from Inheritance tax (and if for the proceeding tax year you gifted nothing - this can be raised to £6000 and then reverts back to £3000 for the following year)

If you gift more than a total of £3000 then you have to consider Inheritance tax. The gift at the time of being made is potentially exempt but is dependent on the you surviving more than 7 years for it not to be added back into your estate, if you survive less than 4 years - then 100% of the gift is added back in - and if your survive between 4 and 7 years then just a % is added back into the estate.

There are exceptions for wedding gifts when the amount is raised to £5000

As far as the Income Bonds are concerned - these are treated as your income for minors and you will have a tax liability on any income arising usually if the interest is in excess of £1000 a year.
Premium bonds are tax free (and have to be held in the adults name until the child reaches 16) but are treated as the child's income but you may want to consider Children's Bonus bonds that are tax free for you both -
But is all instances these need to be transferred to the child when they turn 16 unless your death comes first.

Thanks

Sam
Customer: replied 4 years ago.
Sorry that is not the answe that I want. My children are married one aged 32 the other 30 and living with partner,it's just I lost my hiusband 3 years ago aged 58 and I want to pass all I have onto my children without having to pay the heavy tax if possible, I want to do everything legal and put my affairs in order well in advance before I die hopefully not for many years to come. The ba nk want s me to buy bonds locked for 5 years, but I get nothing for leaving my money in the bank at the moment that is why I though about Income Bonds as I would get an income or Premium Bonds but no one can tell me what to do there, I don't want my kids left with any probllems with tax after I have gone and want to do tghe right thing
Customer: replied 4 years ago.
Sorry that is not the answe that I want. My children are married one aged 32 the other 30 and living with partner,it's just I lost my husband 3 years ago aged 58 and I want to pass all I have onto my children without having to pay the heavy tax if possible, I want to do everything legal and put my affairs in order well in advance before I die hopefully not for many years to come. The bank want me to buy bonds locked for 5 years, but I get nothing for leaving my money in the bank at the moment that is why I though about Income Bonds in joint names as I would get an income, and i pay the tax on them or Premium Bonds but no one can tell me what to do there, I don't want my kids left with any problems with tax after I have gone and want to do tghe right thing
Expert:  Sam replied 4 years ago.
Hi

Thanks for your response

If the bonds are in yours and your child's name you will be treated as the income being both of yours - as they are above the age of being minors and therefore liable on their share of any income that arises from this investment.

Your best bet with careful planning is to gift them a lump sum now and as long as your survive more than 7 years - will have this disregarded for IHT purposes.

If you gift them your home - and then pay them rent )market value) so you do not attract pre owned asset tax (this arises when you gift something and still benefit from it - an annual tax charge arises)
But then they will have capital gains tax to pay after your death should the property be sold.

You really need to take advantage of a financial adviser rather than a tax adviser, as its about making this work for you now, and for your remaining future, as well as your children's future - all the while minimising IHT and tax liability without leaving you without sufficient funds now.
Trusts are another option - you can consider, but again you would need a financial adviser to guide you on these

Thanks

Sam
Customer: replied 4 years ago.
Thank you for that, my last question was, when i asked about Income Bonds in both name at the office of NSanI they told me that as long as one person pays the full amount of tax "myself" on death the bonds goes to the other name and they pay tax on what they earn from it, have I got it wrong as maybe they though I was talking ab out children. After my husband passed away I want to leave everything ok for them. Thank you
Expert:  Sam replied 4 years ago.
Hi

Thanks for your response

If the Income bonds are in joint names - then the bond passes to the surviver but then has to stay for the duration of the bond until maturity or the death of the second person.
Cash in prior to this will lead to a tax implication - so do consider this before tying money up with them.
But the bond which usually has an investment period for at least 5 years - pays out income of between 2 and 5% - as the investment is deemed to be the joint property of all holders.

If the children are minors then the advise you were given applies - but these are not minors

Thanks

Sam





Customer: replied 4 years ago.
Sorry Sam, \It is not bonds that are locked for years, that is what the banks want. The bonds Imean are income bonds that you buy like Premium bonds, premium bonds stay as they are and the income bonds you make money from each month and can cash in after 6 months just like premium bonds, they are bought from National Saving and Investments Blackpool, look them up sthey do seem very good,as you get an income each month and can cash in at anytime for the investment that was put in an no penalties. If Ii were to put in say £50 in both my and my sons name I would get back each £195.83 before tax, this is the bond that I am talking about, for if I the the tax on the income bond surly that should be enough and then when I die the income bonds goes into my sons name as they will be jointly held?
Expert:  Sam replied 4 years ago.
Hi

Thanks for you response

I can tell you how income is taxed but do not know the full and final workings of the bonds themselves ! Thats why I recommend a financial adviser (and see several all of which are independent!)

But I have had a look at the Income bonds you mean and I can see the one you refer to - but putting these in joint names is going to be treated as joint income - Form 17 from HMRC allows an election to be made with spouses/civil partners when the ownership split differs from 50/50 but there is no form for other relationship shared investments - so I would advise that you need to ensure that a declaration is made for you and each of the children's tax offices advising how the income of interest is split and that the investments are made by you - that way you will be taxed on the full interest

Thanks

Sam


However these are still going to be treated as joint property if in joint names
Sam, Accountant
Category: UK Tax
Satisfied Customers: 12934
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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Customer: replied 4 years ago.

 

 

 

 

 

 

 

 

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