What Are The Rules For Gifting Money To Parents In The UK?
By
HuutiMoney
Gifting money to parents and other close family members is a popular way to show your love and support. However, there are certain rules that must be followed when it comes to gifting money in the United Kingdom. In this blog post, we’ll explore the rules and regulations surrounding how much money you can gift your parents in the UK. We’ll discuss the different tax implications of gifting money and provide helpful advice on how to make sure your gifts are compliant with UK law.
What Are The Rules For Gifting Money To Parents In The UK?
When it comes to the rules regarding gifting money to your parents in the UK, there are some basic laws that one would need to keep in mind. These rules apply to gifts given by an individual, as well as gifts from companies, trusts and other organisations.
First and foremost, it’s important to note that HM Revenue and Customs (HMRC) states that any gift you give must be a genuine present and not a form of income. Any gift of money or another asset must be intended as a gift and not for the purpose of providing financial support.
Gifts between individuals are exempt from inheritance tax up to the value of £3,000 per person, per tax year. This means that any gifts given to your parents, which are valued at less than £3,000 each, will not be subject to inheritance tax. However, if the gift exceeds this amount, then it will be counted as part of the deceased’s estate and taxed accordingly.
In addition, there are also strict rules around what is known as “gift with reservation”. This is when someone gives away an asset but continues to benefit from it. For example, if you give your parents a property but continue to live in it, this would be considered a gift with reservation and would be subject to inheritance tax.
Finally, it’s important to remember that any gift you give must be unconditional. If you place any conditions or stipulations on the gift, it may be deemed invalid and could incur a hefty tax bill.
Gifting money to family members in the UK is subject to a number of rules and regulations.
What Are The Limitations To The Amount Of Money You Can Gift Your Parents In The UK?
The UK tax system allows you to give away up to £3,000 each year without paying any tax on it. This is known as your “annual exemption” and applies to gifts of money or other assets such as shares, land or property.
If you give away more than this amount, then you must complete a “gift of assets” form and notify HMRC within 7 years of making the gift. However, this will only be necessary if you are liable for Inheritance Tax.
It’s important to note that the £3,000 limit applies to each individual you give money or assets. So if you want to give £6,000 to your parents, you would need to split it into two separate gifts; one for each parent, with each being limited to £3,000.
You can also carry forward your annual allowance from one year to the next. This means that if you don’t use your total annual allowance in one year, then you can use it in the next year, but only up to a maximum of £6,000.
Will My Parent’s Benefits Payments Be Affected If I Am Gifting Them Money In The UK?
Whether or not your parents’ benefits payments will be affected or not when you gift them with money depends on two key factors:
- the benefits they claim
- the amount of money you gift to them
Non-means-tested benefits such as PIP and Attendance Allowance are not affected by the amount of money a claimant receives in the form of gifts. It is in the case of means-tested benefits such as Universal Credit or Pension Credit that your parents’ savings will be considered during a means test.
If these savings are more than £6,000, their benefits payments will start to reduce. If your gift of money increases your parent’s savings to more than £16,000, they may lose their eligibility to claim means-tested benefits altogether.
Conclusion:
The above discussion helps to lay down some basic rules regarding gifting money to parents in the UK especially when you wish to avoid paying taxes. Small gifts of money (usually up to £250) that are given at varied intervals during the year are ignored by the HMRC and so are those up to £3,000 a year. However, if you are gifting your parents money of more than £3,000 a year, they may need to pay tax on the excess amount.
References:
Gifting money to parents: What you need to know | Shepherds Friendly