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Category: UK Tax
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Experience:  Chartered Accountant >20 years + Qualified IFA
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My friends car broke down recently. It is not financially worth

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My friends car broke down recently. It is not financially worth it to repair the car so the other option is to buy a new one. He does not have the funds to buy a new car.

If I want to give him the money for this car (£10-12k), would that mean he would have to pay gift tax on the money.

Would it also be possible for me to loan him the money without any interest and with no defined repayment date without incurring any tax?

Is this a tax question for a tax expert or a law expert?

This is an England tax question

MamaTax :

Hi Its MamaTax Here!

MamaTax :

Thanks for the question.

MamaTax :

You can either gift the cash or loan it to him - both have no tax implications in UK.

MamaTax :

However if you loan him with interest, then you will be taxed on the interest earned.

MamaTax :

There is no gift tax in UK. However there is inheritance tax which in your case applies if you are to die within 7 years of gifting the cash. The the recepient may be charged inheritance tax if your total estate is over £325k.

MamaTax :

However should this period pass (ie 7 years), then there is no tax implications whatsover.

Customer:

So if i give my friend the money, there is no tax to pay from either of us?

Customer:

unless i die within 7 years, in which case he has to pay tax?

MamaTax :

Yes. subject to my point above...regarding 7 years.

Customer:

ok. thank you

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