UK Tax

UK Tax Questions? Ask a UK Tax Advisor for answers ASAP

Ask an Expert,
Get an Answer ASAP!

UK Tax
This answer was rated:

Gifts out of income.Q1. Can occasional large asset purchases

Gifts out of income. Q1...

Gifts out of income. Q1. Can occasional large asset purchases eg; motor car at £25K be paid for by withdrawing from savings or investment portfolio sale and EXCLUDED FROM EXPENSES for the year - thus releasing more surplus income after expenses for gifting out of income ? Q2 What (HMRC) document clarifies this area of capital asset spending for IHT gifting out of income ? Q3 If Q1 answer is NO - Can husband gift the £25K car purchase money to wife so SHE buys the car and thus leaves the husband's Gifts out of surplus income unaffected ? Thx, AHG 22.00 05.11.2013


 


PS I am familiar with the Gifts out of Income HMRC concepts


and maintain page 6 of IHT403 records annually to help my heirs


with admin after my death - but need answers to Q1,2,3

Show More
Show Less
Ask Your Own UK Tax Question
Answered in 2 hours by:
11/6/2013
Joshua
Joshua, Lawyer
Category: UK Tax
Satisfied Customers: 26,070
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Verified

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

Could you kindly clarify that you are looking at potentially purchasing this car for yourself or your wife rather than a third party (e.g. a child) please?

Customer:

The motor car would be a family vehicle for joint use my wife and myself aged 74 +/- Our Children live in their own homes.

Customer:

Actually the "Motor Car" is simply an example of ""Capital Expenditure""

Customer:

Presumably your advice on allocation of money to "Capital Items" would also apply to, say, a new kitchen at C£20K ?

Customer:

Thx, 10.00 06.11.2013

Joshua :

My apologies for the delay in reverting to you - I have been out on an appointment this morning. Thanks for the clarification.

Joshua :

The first thing to say is that there is no limit on the amount of capital you can spend on items you wish to buy for yourself - e.g. a car, holiday, home improvements and so on. Equally there is no limit on the amount of capital you can spend on or gift to your spouse. You can spend an amount on you and you spouse - £1 or £10m and it makes no difference to the amount you can gift to others as part of your £3,000 annual exempt amount nor does it impact on the amounts you can gift to others out of income.

Joshua :

Making gifts to persons other than your spouse (and spending money on yourself) however is a different matter if your estate is liable to inheritance tax - between you and your wife you have a £650K allowance before your estate is taxed at 40% on anything above that figure.

Joshua :

If you are in that position where IHT may be payable on your estate then there are limits to what you can give away to third parties. You can each give away up to £3000 in capital to third parties in any tax year (double in the first year if you did not use your £3K allowance from the last year. You can also give away additional sums for special occasions e.g. weddings. If you give away more than these amounts, that is entirely your right and those gifts will stand however if you die within 7 years of making such gifts over your allowance then HMRC can treat your estate as if you had not given away such amounts over your allowance. e.g. if you gave away £10K and died the next day HMRC would treat your estate as if it had still had £7K of the £10K (i.e. £10K-£3K allowance) in it and tax it accordingly (there is taper relief available if you survive more than 3 years on a sliding scale)

Joshua :

In addition to the above you can give away as much as you like from excess income with the only limit being the amount of income you have available to give away. In order to qualify however the gifts must pass three criteria:



  • the gift formed part of the your normal expenditure - i.e. it must be regular not a one off gift

  • the gift made out of income, and

  • the gift left you with enough income for them to maintain your normal standard of living

Joshua :

Capital withdrawals would not qualify to designate as gifts out of income and would so far as they ar over your £3K annual allowance be treated as a potentially exempt transfer if gifted to a third party - i.e. as discussed above would fall out of your estate after 7 years but prior to that would be taxed on death as if you had not given it away.

Joshua :

In answer to your final question, so far as it is not made clear above, whether you buy the car (in your example) for yourself or your wife as a gift it makes no difference to your allowances as you can buy as much as you want for you and your wife without effect on your allowances.

Joshua :

References for the above information is the inheritance tax manual IHTM14241, IHTM14250-1 and s21 Inheritance Tax Act 1984 and Finance Act 1986.

Joshua :

Is there anything above I can clarify for you?

Customer:

A comprehensive reply, for which I thank you.

Customer:

For absolute clarity - do I understand that when buying the £25K car, from CAPITAL ( Savings or realised investments) this can be ignored and omitted from the records and calculation of the disposable income to maintain our normal standard of living ?

Customer:

My motive is to leave a clear financial annual record for my family/executors to minimise their work as my estate will be substantially above the

Customer:

IHT threshold(s)

Joshua :

A pleasure. Yes in deed if buying items for you and your wife this has no bearing on IHT for gifts to third parties be it out of capital or income.

Joshua :

You motives will prove very helpful to your executors as tracing records for gifts especially gifts out of income can be difficult if there is a lack of records.

Joshua :

Is there anything above I can clarify for you any further?

Customer:

That completes my mission - Thank you 06.11.2013

Joshua
Joshua, Lawyer
Category: UK Tax
Satisfied Customers: 26,070
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Verified
Joshua and 87 other UK Tax Specialists are ready to help you
Ask your own question now
Ask Joshua Your Own Question
Joshua
Joshua
Joshua, Lawyer
Category: UK Tax
Satisfied Customers: 26,070
26,070 Satisfied Customers
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice

Joshua is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Sam

Sam

Accountant

6,508 satisfied customers

26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax

bigduckontax

bigduckontax

Accountant

859 satisfied customers

FCCA FCMA CGMA ACIS

TEAP007

TEAP007

Tax Preparer

759 satisfied customers

Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years

Andrew Baker(baktax)

Andrew Baker(baktax)

Personal Tax Adviser

756 satisfied customers

35+ years experience in income tax, CGT, non-residence

berduchwal

berduchwal

Accountant

669 satisfied customers

Qualified accountant and bookkeeper running my own practice since 2008.

Clare

Clare

Solicitor

147 satisfied customers

25 years exeperience as a high street solcitor

Mrs-Tax

Mrs-Tax

Tax Adviser

59 satisfied customers

Law Degree, 19 years in UK Tax.

< Previous | Next >

Related UK Tax Questions
I'm doing the accounts for my sister who owns a micro entity
Hi Pearl, My name is ***** ***** I'm doing the accounts for my sister who owns a micro entity business company. Last year was the first accounting year and I laid an abrieved.online account. I'm about… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
859 satisfied customers
I have a UK/Australia tax question not social security. I
I have a UK/Australia tax question not social security … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
859 satisfied customers
You recently (Nov 16th) answered questions in relation to
You recently (Nov 16th) answered questions in relation to CGT on the sale of a holiday home in France, for which many thanks. I do have a few more specific questions re. other allowable costs. These a… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,059 satisfied customers
My father and step mother are both in separate care homes.
My father and step mother are both in separate care homes. They jointly own a house. My father has a state and occupational pension both of which are considered as sole his income by the local authori… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,059 satisfied customers
I wanted to know if a uk limited company could lend me
I wanted to know if a uk limited company could lend me monies to purchase a property. I am not a director of the company … read more
Sam
Sam
Accountant
Higher Officer HMRC
6,508 satisfied customers
I don't have a social security question. I have a micro
I don't have a social security question. I have a micro entity account question. … read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,059 satisfied customers
I have been sent a letter from the tax - it seems my
I have been sent a letter from the tax - it seems my accountant has declared more subbies working for me than actually did, despite the fact that I sent off my subbies tax deductions every month after… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,508 satisfied customers
We have a holiday home in France which we have had for 23
We have a holiday home in France which we have had for 23 years and wish to sell. I need to know which costs for renovating it are allowable against capital gains tax.… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,059 satisfied customers
I am a UK resident for tax purposes since 2012. I plan to
I am a UK resident for tax purposes since 2012. I plan to transfer to my 25 year old son who is a UK tax resident, this year a plot of land in my country of birth which i bought 23 years for the equiv… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,059 satisfied customers
We are a us based company. We have a question about vat.
Hello. We are a us based company. We have a question about vat.Essentially we connect a client in the UK with a client who could be anywhere in the world.We handle the payments.We take money from the … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
859 satisfied customers
This is a question for a Verified UK tax professional only I
This is a question for a Verified UK tax professional onlyI am a British national and an Australian resident for tax purposes since March 2016 (I have not been outside Australia since then and have a … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
859 satisfied customers
I am serving in Army. I was advised by HM Customes to use a
I am serving in Army. I was advised by HM Customes to use a UK414 to register my tax free vehicle when I bought it over from Germany, the same person is now telling me 1 1/2 years later that I have to… read more
TEAP007
TEAP007
Tax Preparer
Fully Trained Inspector of Taxes B1
759 satisfied customers
I get tax credits but have inherited money following the
i get tax credits but have inherited money following the death of my mum. Do i have to advise tax credits of this. Have given some money to other family and paid off debts. Not a lot left but not sure… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,508 satisfied customers
I am receiveing money from abroad, do i have to pay for Non
i am receiveing money from abroad, do i have to pay for Non Residential Tax Clearance Certificate? … read more
Clare
Clare
Solicitor
Bachelor's Degree
147 satisfied customers
I used to live in Ireland 4 years ago and set up my TIN
Hello, I used to live in Ireland 4 years ago and set up my TIN because I do world-wise freelance, however I've been consistently moving countries because I like to travel and wasn't aware on how to do… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
859 satisfied customers
I'm trying to submit abbreviated company accounts for my
I'm trying to submit abbreviated company accounts for my Cricket Club to companies house and not an accountant! Keeps coming up with the message "Current period: Members' funds must be equal to the to… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,059 satisfied customers
I bought a property in 1997 for £120K i moved out in 2004
i bought a property in 1997 for £120K i moved out in 2004 and started renting it out. so it wasnt my main residential address from 2004 onwards. I am looking to sell property prices seem to be about £… read more
Julie Kingham
Julie Kingham
Director
Chartered Tax Adviser
733 satisfied customers
My 2016-17 tax statement from Funding Circle is here (
My 2016-17 tax statement from Funding Circle is here (https://i.imgur.com/WvhqXTI.jpg). Funding Circle's guidance on tax is here (https://support.fundingcircle.com/hc/en-us/articles/214636966). The in… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
859 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x