Bank of Mum and Dad, how does that work?

[Kendodd]

If parents give children a large amount of money for a house deposit (for example) does the tax man get a big cut of it? I thought cash gifts were restricted to 3k per year before tax was liable? Also university fees of 9k if a parent pays those, again, does the tax man get a look-in?

Thanks

I understand it as parents can bestow £5,000 each to their child tax free so £10,000. Other amounts to other people.

And that you can give more away as a cash gift, but it would be subject to inheritance tax if you died within 7 years of gifting it.

That is my understanding - I could be wrong through!

The cash gift (if over £5,000) does that not attract any tax if parents live for at least seven more years?

So for example I could give a one off gift of say, £50,000, to a child to help buy a house and the tax man doesn't have to have a cut?

If you survive for 7 years after giving that £50k sum then the tax-man gets nothing at all.

My parents did it for me, we are now nearly ten years down the line so will never have to pay tax on it.

There are other occasions when you can give more and it wouldn't be caught by inheritance tax even if you died within 7 years of giving it. Marriage is one occasion, I don't know what else.

That's my understanding OP.

I think I read somewhere that the giftee should keep proof of when it's gifted so it's straightforward as far as iht is concerned when the gifter does eventually die, and there won't be a dispute.

But maybe keep bumping for someone qualified who knows.

Xpost Ali

We wouldn't qualify for IH anyway so that's not a worry.

Having received a parental gift of greater than £10,000 the way to avoid tax is for the entire amount to be loaned to the child. The loan is then paid off by each parent gifting £5,000 per year As long as both parents live 7 years beyond the last gift.
For example £35,000 year 1 both parents gift £5,000 each, year 2 both parents gift £5,000, year 3 both parents gift £5,000 and year 4 both parents gift £2,500.
We are lucky enough to have a tax accountant and an IFA in the family.

you can give as much as you want as long as you plan on staying alive for a while.

Lonecat that seems a very complicated way of doing this as cash gifts are tax free as long as the giver survives 7 years afterwards . Unless you are attempting to stagger the gift in case the giver dies sooner, in which case it would be better to use £3k per annum as this is the current annual exemption amount.

Yes 3K is what you would use I didn't want to use exact numbers it was very large gift for a variety of numbers and would have attracted tax without this method.

I didn't think - aside from the IHT implications already mentioned if the gift is close enough to death - that there were any tax implications of a parent giving money to an adult DC. There are restrictions on giving non tax-paying children money or taking out investments on their behalf for obvious reasons. Not adults giving other adults money.

Only spouses or civil partners are completely exempt from tax. Anyone else you can give up £3,000 in one year, there are exceptions such as marriage and children under 18.

So adult children who are not getting married you give £3,000 per parent without tax implications over this amount they either have to pay tax or you have loan the greater amount and gift it off over several years.
Check HMRC this morning this is current advice.

Also it's only an issue if your entire estate is going to be worth more than 325k - or up to £750k if you're married.