Gifted funds - taxable?

[killedanotherhouseplant]

My parents have recently seen an account to plan for inheritance purposes. They have decided that they would like to gift me a fairly substantial amount (£1000) per month, from their excess income.

I have had multiple conversations with them about how I would rather they spend the money on themselves, but they are convinced that this is what they want to do.

They are confident from their perspective that this is risk-free. However, I am wondering whether or not from my perspective I need to count this as "income" when I do my tax return (and if so - it will push me into the higher tax bracket). I'm hoping not, because it's a gift, but I can't find clear information anywhere.

No, it's fine because it's a gift. From their perspective, if they wouldn't be spending it anyway it would just accumulate and add to their estate, and you'd get it in the end but it would be taxed at 40%. So they'd rather you had it now.

That's exactly their logic - thank you. I am of a slightly different mindset (it's not money I've earned - so I don't mind being taxed on it for the good of the nation, but that's not their wishes, and I respect that).

Thanks for the clarity.

If it's any consolation, doing this kind of estate planning now probably means there's plenty to potentially pay tax on later!

Gifts are always exempt from income tax.

Gifts out of excess income are exempt from IHT on death provided they meet the criteria.

If it's excess from their income, it's exempt, as long as all their needs are met from their income I think.

Any gifts made within 7 years of death are charged inheritance tax. Just bear that in mind. They can each make £3k of gifts tax tree each year.

This is regular payments from excess income. It's a different thing.

It has to be from regular monthly income though, not from investments. They should keep records of their income & expenditure so that you can prove at a later date that it was out of excess income, but I'm sure the accountant will have told them that
It also has to be regular, eg monthly, as he has obviously also told them.
https://www.gov.uk/inheritance-tax/gifts#:~:text=You%20can%20give%20away%20a,%C2%A33%2C000%20between%20several%20people.

My mistake. Good to know.

"They can each make £3k of gifts tax tree each year."

You are missing out on the fact that this is "normal expenditure out of income"

In the UK you can make regular payments of gifts to another person and there’s no limit to how much you can give tax free every year, as long as:

• you can afford the payments after meeting your usual living costs
• you pay from your regular monthly income

https://www.gov.uk/inheritance-tax/gifts

Not true if it's a regular gift out of excess income. Look it up!

If you are not comfortable with it, just keep it to one side in case they need it. I intend doing the same at 67 (not £1000 per month) and am looking forward to seeing childen spend it/save it.

Not always, but this one sounds fine from a tax pov provided that it's a true gift, ie no expectation of repayment, and it truly is out of excess income, not capital.