Partner's German mum sends money each month- does it need taxing?

[Ladamesansmerci]

Hi, all. My wife and I both work full time (though I'm currently on mat leave). I'm a band 6 nurse, and my wife is on minimum wage. I'm British, and my wife is German, but we both live in the UK full time and she has right to remain.

To help us save for a house etc, my wife's mum transfers my wife €500 per month into my wife's German account. We just plan to let this money accumulate towards a housing deposit, or for any calamities e.g. need a new car.

My question is- do we need to fill out self return tax assessments on this? Is it considered income that we need to declare? Or will it already have been taxed in German and has nothing to do with the UK side of things?

No. I'm it isn't income, it's a gift

Gifts are tax free in the UK except for inheritance tax if you die within 7 years (you should keep your own record of gifts just in case). I have no idea what the rules are in Germany or if the taxing gifts UK rules apply to gifts from outside the UK. I would ask HMRC if you want a definitive answer, they have a web site forum where you can ask questions and HMRC reply.
https://community.hmrc.gov.uk/

As the earlier replies have said, in the UK this is not taxable income, it is a gift. Even in Germany, I believe that gifts this small between a parent and a child would not be taxable either.

Excellent, thanks everyone! I'll check with HMRC to be doubly sure, just wanted to make sure we're not accidentally committing fraud or something 🙈

Or will it already have been taxed in German

It is taxed in Germany (obviously) and it is my understanding that it is income for you both so will be eligible for tax. But what do I know about German/Brit tax laws?

I did have it happen both ways from UK to a different European country in my case.

I would google HRMC to find out. No point in asking something this complicated on a random website.

"It is taxed in Germany (obviously)"

That's interesting. Why do you say "obviously" as it is not obvious at all.

"...it is income for you both so will be eligible for tax."

Again, an interesting take. I would be interested to understand why you think that.

"Taxed in German".

Love the typo."steuerpflichtig auf Deutsch."😄💕.

No, I'm guessing it's a gift from regular income. Nice MIL, by the way!

Are you both under 40 and do you both have a LISA?

You don't know anything, which is why you've given the wrong answer

EUR 6000 per annum is not that small for UK IHT. No idea about Germany. But OP needs to check out both UK rules, but more particularly German rules. Most Internet sites now offer language translation, so easy enough to find out.

"EUR 6000 per annum is not that small for UK IHT."

You appear to be unaware of UK IHT rules. UK IHT would only apply if the mother lived in the UK (she appears to be living in Germany and so German IHT rules would apply when she passes away)

Even if the mother did live in the UK, for any payments that are normal expenditure out of income (ie her mum is giving them a regular monthly payment that comes out of her income) then these payments are totally exempt from IHT - Section 21, Inheritance Tax Act 1984.

The main consideration for the OP is if this money is considered a gift or income in the UK and so whether or not she needs to declare it to HMRC.

If you are receiving money in return for a service or for selling something and you are doing this as a "trade or profession" then HMRC will consider that you are trading and want their cut of your profits.

In contrast, having your mum send you €500 per month is definitely not "trading" it is simply a regular gift.
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"...but more particularly German rules"

Again, this would only be relevant for her mum who lives in Germany. I am sure that her mum is likely aware of any IHT rules in Germany (I believe the tax free limit for gifts to a child is €400k)

@Another2Cats I'm perfectly aware of UK IHT rules. But there was little information provided in the OP, so provided a small indication that this might be beyond the normal annual giving limits in the UK. Your lengthy post provides more detailed information but who knows what's relevant. OP and their spouse will need to investigate further looking at both countries rules.