Jeremy Corbyn wants to impose lifetime gift limits on children of £125,000

[ForTheLoveOfDoughnuts]

So we pay tax on what we earn. What we buy. And now this.. what's the point of working hard to help out our kids, for this to even be considered. Or AIBU?

I don’t know how this would interact with inheritance tax, but I think the number of people who can pass on assets of £125k during their life time is very low. Presumably exemptions would apply to protect transfers of businesses to new owners.

Some people on this thread seem to be talking about taxation of expenditure of income on dependants, but again, I don’t think that is what is being suggested.

My concern would be that the small number of people who would be liable for this tax would also be people most able to arrange their affairs to avoid tax, so it’s not clear how much money it would raise.

One negative aspect of the tax might be that it discourages empty nesters from down-sizing if it is in addition to inheritance tax.

As it would be paid by the recipient I think it would be difficult to avoid. The 125k threshold would take the place of inheritance tax.

Depends where the recipient is receiving the funds/asset if outside the UK.

That's true, I'd imagine there would have to be provisions for non UK based recipients.

What is the current law on UK estates and non UK residents? They pay IHT here ?

Regular gifts out of income are not subject to IHT rules, even if over £3,000. Income is not part of your estate until it has sat around for long enough to count as capital. So, eg, you can be extremely wealthy and give extremely generous birthday and Christmas presents of cash to your children every year and they will not be subject to IHT however large, so long as your income is large enough for it not to affect your standard of living.

Maybe I should have said ‘evade’ tax. U.K. residents pay IHT on foreign assets, but if they aren’t declared they can be difficult to trace.

When somebody dies it’s pretty clear that their estate will be transferred to somebody else and there is a reason to account for and value all their assets. The same level of scrutiny isn’t applied when they are alive.

The IHT rules don’t differentiate between gifts from income or capital. Where do people get these strange ideas from?

www.gov.uk/inheritance-tax/gifts

@Alsohuman

Really? I must have dreamed the normal expenditure out of income exception from inheritance tax then. Section 21 of the Inheritance Tax Act 1984. As long as the gift entitles you to maintain your usual standard of living and is made out of income and is normal (I.e. not a one off gift) then it is excepted.

Odd that the government website doesn’t say that, don’t you think?

The IHT rules don’t differentiate between gifts from income or capital. Where do people get these strange ideas from?

Tax law.

Also human, no. The government website is an extreme overview and not a substitute for the legislation. Just read the legislation: section 21(1) IHTA 1984.

If you must read it on the government website instead, try searching HMRC's inheritance tax manual.

www.legislation.gov.uk/ukpga/1984/51/section/21

It's also the first line of your link Alsohuman...

"There’s usually no Inheritance Tax to pay on small gifts you make out of your normal income"

As I said an extreme overview...

Justanotherlurker - so instead of thinking big and taking on the corporations, we tax the smaller/medium businesses to cover the costs of things.

Yeah, it’s too hard to go after the big guys (Amazon, Google etc) so let’s just give up and pile more taxes on the little people - sole traders and small business owners - instead. Great one

I apologise - a little knowledge and all that.

No worries! Tax isn't known for its simplicity! Dongdingdong, you might be interested to know that lots of measures have been introduced to tackle big multinationals. For example, diverted profits tax- aimed specifically at Amazon and Google's alleged tax planning.

skinnyduplotowers

Under tax law, would those gifts out of normal income need to be regular or could they be one offs?

Corbyn can suggest whatever he wants tbh , he’ll never be PM .

MaximusHeadRoom, £125 is nothing unless it is in addition to the sale of a property. A house would fetch a lot more than that. So someone leaving £125 to children is not wealthy.

But this isn't about cash or sale of assets you leave when you die. This is about money you gift whilst you are alive. If you can give over £125k cash to your kids whilst you are still alive then you are wealthy. And bear in mind that the first £125k will be tax free. How many people are actually going to be affected by this?

Yeah, it’s too hard to go after the big guys (Amazon, Google etc) so let’s just give up and pile more taxes on the little people - sole traders and small business owners - instead. Great one

How do you suggest we tax an american corporation based in the EU, now we are leaving?

A £125k per child still means uni loans and a house deposit can be given before any tax paid.... hardly draconian.

Its also only an idea from a labour think tank... not policy, so all you would be wealthy tories can sleep easy :)

If small business owners have this sort of money laying about, perhaps they should pay their staff more so they don't have to rely on the state to top up their wages?

What no one has mentioned so far is how a change that initially affects no one or hardly anyone is actually just the first step in the wrong direction and the opening of a door. remember tuition fees anyone? Oh its only a very small amount, barely noticeable, only covers a basic cost, will only affect the rich blah blah blah and now look at it. The door was opened and successive governments piled in.

and this is what this will do. so yes maybe it starts off at £125K per child per lifetime. but once this legislation is in and accepted how easy would it be for successive chancellors to change it to £100K or £50K or whatever they wanted.

this is the issue with any of these ideas that "only hit the rich" That might be the intention when they start out but all of us who are old like me will have seen it time and again.

i dont trust politicians, any politicians, not to see this as a way of making significant amounts of money.

If you can give over £125k cash to your kids whilst you are still alive then you are wealthy

So what? Let people be wealthy. As long as they pay the correct amount of current tax then let them be rich. It doesn't affect me, or you, or anyone else.

@Purpletigers, people said Trump would never be president. That went well. If modern politics has shown us anything it’s that nothing is impossible.