Tax on savings??

[Bubblegum25]

I won't pretend to be an expert on the subject, and having read different articles/information online, I feel even more confused than I did before.

Can someone please explain to me how this will work if Labour are voted in?

My lovely dad gifted me 60k towards a house deposit around 8 months ago which I still have as the market is terrible where I am at the moment. The money is in a current account, not a savings account so not making any interest etc. I work full time on a low wage and currently rent alone so no chance of me ever buying a house without this money even though I do try and save myself (before people say I'm selfish or greedy). Will I be taxed on this?

Sorry if I sound stupid but I honestly haven't got a clue and it's all a bit confusing and worrying!

Er, not true. I inherited a house along with a sibling. We had to pay a huge amount of IHT before probate could be granted so we could sell the house. Obviously we didn't have the cash to pay it, so had to take out a bridging loan. They did say we could pay in installments as the cash was tied up in the house, but it was still a lot!

No government is going to tax relatively modest savings like this. Never in a million years.

Yes, I know £60k is a fortune to many, but it's also a deposit for a fairly average house, or the sort of savings that many retired people or those nearing retirement have.

Everyone pays income tax on the interest earned on savings.

It's nothing new.

It’s even more misleading because it’s the estate that pays. If her father hasn’t left enough to pay IHT on the stuff he has gifted to OP, it’s unlikely that his estate will be liable for IHT in the first place

Er.. that is precisely what I said. The house was part of the estate, and IHT had to be paid from the estate by you as executor before probate could be granted and you in your role as executor could release the house to yourself in the role of beneficiary. You as beneficiary did not have to pay, it was you as executor who had to.

OP was gifted a sum of money while her father was still alive. If he dies within 7 years, the executor will list the gift, and the value will be added to the estate. If the estate comes to over the IHT limit, then the executors will have to pay the tax out of the estate before distributing it.

You were in a difficult position because all the money was tied up in the house. If there had been savings separate from the house, the IHT would have been paid from that.

I’d put £20k into an ISA and the £40k into premium bonds

@MereDintofPandiculation yes OP is in a different situation.

I do understand what you are saying and that was what I read everywhere at the time. But the fact is, we had to pay a load of tax, and then subsequently inherited some money to pay ourselves back over a year later (house didn't sell for ages). Meanwhile we were paying back a high interest loan every month.

I imagine quite a lot of people are both executor and beneficiary, in fact if you are only an executor I have no idea how you would pay IHT and get the money back then!

I think it could come as a shock to some people that it works like that so just wanted to point that out.

You'd have to mortgage the house to pay

no she won’t - IHT is paid from the estate - they do not go chasing the gift recipient for the tax.

@Merryoldgoat I think that is only if gifts given (to anyone) amount to <£325,000 within seven years of death. If they amount to more than £325,000 the individual gift recipients are responsible for the IHT.

thanks for that input - idiotic and naive

this is from taxjournal.com where the possibility of labour introducing a tax on wealth assets is discussed:

Speed read
A Labour government is far more likely than a Conservative one to introduce a wealth tax. Voices in support of a wealth tax have been louder over the past decade. There is a significant body of research in support of it, and that counters the main argument against it (likelihood of migration by those who would be affected). Something needs to be done about the UK’s level of poverty and its fractured society. More tax needs to be raised. A wealth tax, while not in itself enough to eradicate these problems, would play an important part of doing to. The chances of Labour introducing one therefore seem reasonably high, and the most likely structure would be an annual tax, at a fixed rate above a certain net assets figure.

None of that gives any suggestion that a labour government would introduce a tax on the OPs £60k capital.

You'd have to be utterly idiotic to believe that it does. When talking about 'wealth' £60k is nothing. Tens of millions of people have that amount when all assets are included.

As well as it being extremely unpopular, how would you assess it? You'd need everyone potentially in scope to do a tax return and a massive inspection input to ensure a decent level of compliance.

You’re completely wrong, the individual gif recipients would only be responsible for the IHT if the estate had no money to pay it, ie if you gave away everything as gifts in the 7 years before you died.

Thanks for random fiction off the internet that has nothing to do with taxing savings for OP.

Precisely this!

This is incorrect. If the value of lifetime gifts in the last 7 years exceeds the nil rate band of £325k, any excess is charged on the gift recipient. It is called a failed potentially exempt transfer. It was potentially exempt when made (and would be exempt if survived 7 years). The death within 7 years means the potential failed. The gift is then charged to the extent the nil rate band is not available.

I guess the barrister doing my relative’s probate at the moment is wrong then 🙄