Child tax credit and savings/inheritance

[LMonkey]

We get child tax credit and my dad has very kindly gifted us a large sum of money to pay off a chunk of our mortgage as a kind of early inheritance. This money is sitting in my account while I wait for the mortgage renewal date and can pay it without incurring an early repayment fee. Will this have any impact on our tax credits? Whenever I have filled out the forms it has never asked regarding savings, and since we've only ever had a few grand each hadn't really thought about it. But as this is a large sum (albeit won't be sitting there for too long) I just feel rather nervous.

Tax credits run by HMRC is a system that is only interested in income, so while any interest earned will have to be declared at some point, it will probably be negligible given current interest rates, and more importantly HMRC don't take capital (savings) into account.

It's Universal Credit run by the DWP that would penalise you for this.

As above, tax credits don’t care about savings, only income.

Ah thanks

Is it counted as income though? It’s a gift coming into your account rather than savings. I think there is a limit on how much you can be gifted tax free from a parent?

It seems to be very difficult to find out about though...i really couldn't seem to find a clear answer regarding child tax credit online. How can I find about the gift giving limit?

The tax free gifting is to do with inheritance tax and is an annual limit of £3000. It won't affect your tax credits as it isn't your tax to pay but if your dad was to die within the next 7 years then it would be included in the figures for inheritance tax.

moneyfacts.co.uk/savings-accounts/guides/how-much-can-i-give-as-a-cash-gift-and-how-is-tax-affected/#What_is_the_maximum_I_can_gift_to_my_child_or_grandchild?

This might help you? Seems to say that hmrc do not count gifts as income but if you make any money on it that would be counted as income. You could always send an enquiry to hmrc to confirm

Thanks everyone

Lots of different things to consider, for which you've already had some answers.

The gift itself doesn't matter at all for tax credits (universal credit is different as savings are relevant).

Any interest earned on the money forms part of your income.
There are tax allowances for savings so unless you have significant other savings this is unlikely to exceed them (assuming reasonably low income as you get tax credits).
The interest is also counted as part of your income for tax credits purposes but the first £300 is not counted.

At current interest rates I don't suppose you'll be talking about a lot of interest?
If you are, you could consider putting the money into premium bonds for the time you will hold it.

If over £3k it is a potentially exempt transfer for inheritance tax, and only becomes relevant if your dad died within 7 years of making the gift. No tax would be payable at the time of the gift.

Potential deprivation of assets for future care costs for your dad.