Can anyone help re: tax implications of gifts from parents/grandparents?

[Millarkie]

MIL has offered to pay a small proportion of the children's school fees. If we accepted would we need to pay income tax on the money she pays? Or would it count as money given to the children?
And as it would be less than £3k a year we are assuming that it would not be counted for inheritance tax (not that we are expecting her to die in the next 7 years).

At the moment we are thinking of turning it down but trying not to offend her...for many many reasons, not least that she should save the money and spend it on herself!

All advice gratefully received - Thanks

You are right about the 7-year rule for gifts falling out of the inheritance tax bracket. However, I think that if she is paying the fees out of her usual income, it is a regular gift and by doing so she is not reducing her own standard of living, then the gift would not count for inheritance tax purposes anyway. She would have to keep meticulous records with the dates and amounts of the gifts though.

Fairly definite there would be no income tax to pay on the gift as it is not earned income. Portonovo also right that gifts of more than £3,000 can be given away without being liable for IHT if it is from her income, (not capital), and does not affect her standard of living, (ie is spare money).
Certainly gifts of up to £3,000 can be given away free of IHT.

Don't think you have any legitimate "excuses" to use in this regard.

the £3k per yr is £3k that an individual can give away IHT-free, not per person. So your very generous mil could not, say, be giving £3k towards your children's school fees, and £3k to her other grandchildren's school fees iyswim.

Any gifts she makes in excess of the £3K have to come from income. She can give any number of £250 away, but not to the same person as received the £3K. Additional monies can go to children/grandchildren, on marriage etc. She is free to give anything she wants, but any sums in addition to the £3K will become a Potentially Exempt Transfers. PETs get added back into the deceased's estate for up to 7 years after death.
No income tax is payable by the beneficiary of such gifts.

Thanks everyone - great replies - so consensus is that we don't need to pay income tax.
As for inheritance tax - it will be from sold stocks/shares so I would say capital rather than income. She doesn't have other grandchildren to gift to (and is unlikely to get any more), but the amount she wants to gift us is well within the £3k limit so she will have some spare 'allowance' to gift to another son I guess. (We have pointed out the £3k thing).

Now, secondary question - now FIL has shown interest in paying something towards the kid's school fees - they are married, live in the same house but have separate finances to all intents and purposes (long story - basically seperated but living under same roof for years).
Is the 3K allowance per couple or per person?

This is getting complicated, mainly in not wanting to discuss the 'but what happens if you die' or 'what happens if you need all your money for nursing care' type conversations..on top of the fact that although the children's school is great we don't know if we want to keep them in it for ever. If we were to have another child we certainly couldn't afford it, even with help from GPs so almost feel like they are taking the choice out of our hands (bet they wouldn't have offered if they realised it was shortening the chances of another grandchild!). Oh well...

£3,000 per person, not per couple.

Thanks Helenn