Large cash gift from parents - tax implications?

[Titsywoo]

My parents are thinking about selling their business soon and they would make a large profit from it after selling costs/corporation tax etc. They want to buy properties for my brothers (although in their name) but since we already own a house they are planning to give DH and I a large cash sum (in the hundreds of thousands). DF is convinced we won't have to pay tax on this but that sounds too good to be true - what is the reality regarding this?

I think your dad is right. But if he dies within 7 years of gifting it to you then it would be liable for inheritance tax.

There's no income tax payable on cash gifts.

There may / may not be IHT implications.
Lots of posters will join this thread and tell you about IHT . Some will be on the right track, some completely off.
Please ignore all of them: beg, cajole, implore your parents to take serious professional advice about IHT, CGT ,owning multiple properties, and tax planning for inheritance and for their own later life. No one here can give sensible advice, not knowing the whole picture.
The potential tax costs of not paying for advice now, could lose the family 28-40% of what your parents have worked for.

Exactly what @permaexhaustion said. Your parents need to seek specialist accountant advice about selling their business, and about making huge cash gifts. They should know that already? And they should have a financial advisor?

There could be IHT implications if your parents don’t live for 7 years after giving you the money.

@Permaexhaustion said it all. They need to get professional advice on any implications. My parents made sure they sought professional advice from tax advisers and solicitors before making large cash gifts to me and my sibling and signing over a second property to us. Same for my best mate when her dad signed over a property to her and her sibling. Only the professional tax advisers and solicitors can fully evaluate their affairs and say what is most tax efficient.

No tax implications on you as its a gift. Full stop.
Possible tax implications on their estate if they die within 7 years.
But basically, do not worry.

That's great thanks - yes they have a financial advisor but my DF is prone to saying things to me before getting the correct information so I wanted to check!

Going on from the IHT issue there is also the possibility of one of them going into a home or needs care. If I remember right large cash gifts given away before X amount of years is classed as giving cash assets away so could be liable for something.

Don't trust that as gospel but I'm sure I read something along those lines

As an added note, if IHT arises due to death within seven years of gift, that liability is on the recipient, not the Estate. It is often covered by NIL-Rate Bands, but with the values you are talking about you would be hit.

The Estate is only chased for the IHT if the beneficiary has no means to pay. In your case, I doubt that would apply.

Thank you - would IHT apply if only one of my parents die? Due to the fact that they are only mid sixties and in very good health (and both with parents who lived into 90's/100's) I don't see it happening but you never know what the future holds (sorry I'm not heartless, I do love my parents I just have my sensible head on for this conversation!).

Depends on how high the values are of the gifts. They would be split equally between the parents, and if their half on death exceeds the £325,000 threshold there would be IHT.

If you know estimated values I can do a calculation for you with different scenarios

But IHT doesn't just depend on the value of the gifts- it depends on the value of the whole estate, and also who it is left to, whether the 2nd death can utilise IHT free allowance from the first death, what proportion of the estate was the value of the family home, what increase there has been in the value of any properties outside the family home, how the wills were written, - and that's just for starters.

Tax accountant.Whole family picture. Anything less is game of pinning the tail on the donkey ,whilst blindfolded.
IHT is a voluntary tax : good for your family if they want to pay more tax, this country could probably do with it. If on the other hand you are less public spirited, and would prefer for the offspring not to have to sell houses to pay 40% of their gifts to the Exchequer, take advice.

Not from a financial advisor who advises on investment and insurance. From an appropriately senior tax accountant who specialises in this area.

if IHT arises due to death within seven years of gift, that liability is on the recipient, not the Estate.
Not in my limited 25 year experience.
The value of the gift is added back into the estate to calculate the charge

BUT
Diminution rules for Nursing and residential care are a
VERY DIFFERENT ball game
if your parents do not have a tax accountant, they need one urgently

Gifts within 7 years of death are added back to the estate of the donor in order to calculate the total inheritance tax due. But then the tax is split between the recipient and the estate. If the recipient doesn't pay within 12 months then HMRC will pursue the estate via the executors. If I can find the HMRC link I will post.

I think this is it. www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm22076