tax implications of helping adult son

[EmmaGrundyForPM]

Our adult son (early 20s) is currently undertaking an Apprenticeship. His pay is very low, and so we are paying his rent for him (in a shared house). We did the same for his brother whilst he was doing a uni degree.

However, as DS. is an apprentice rather than a student, I'm not clear about the tax implications. I'm a base rate tax payer, DH is a higher rate one. We are giving DS £400 per month to cover his rent. So £4,800 per year. DH and I have separate bank accounts and the money comes out of mine, as DH pays other things.

I've looked it all up on line and am confused, because it says I can give away £3000 per year, but does that mean after I've given DS £3000 he has to pay tax on it? If I give him £3000 and DH gives the rest, is that OK?

I also read that we could give him a substantial one-off gift which he wouldn't have to pay tax on as long as we stay alive for at least 7 years. So would it be better for us to give him 3 years worth of rent in one go? That would be quite a stretch for us financially but we coukd if necessary.

We are not trying to cheat the system, we are just trying to support DS through his 3 year apprenticeship. Obviously if he has to pay tax on it he will.

TIA

You can gift someone as much as you like. It is called a PET - Potentially Exempt Transfer. If you die within 7 years of giving the gift, then it is potentially taxable.

An old podcast episode so some thresholds may have changed but the principles apply: meaningfulmoney.tv/2013/04/27/mmp009-inheritance-tax-and-estate-planning-podcast/

@nannynick is right OP, the tax implications only kick in if you die within seven years of gifting.

Yes you can make a gift of any amount which is tax free unless you die within 7 years - and you have an annual allowance of £3,000 to gift without any tax implications. So actually if you give £2.400 and your DH gives £2,400 you’re both within your allowance.

You can both gift £3000 each every year.

It is not just inheritance tax that is a concern. Even if your assets are below the IT threshold, and you need to go into a care home, the council could investigate for deliberate depletion of assets when judging how much you should pay towards your care. I wouldn't have thought this would be an issue in this case, but something else to stress you out as you get older.

Gifts out of income are exempt from IHT. But you do need to keep transparent records so your heirs/executors can show that you could afford it.

Read www.gov.uk/inheritance-tax/gifts. There is a section which mentions paying rent for your child.
It says 'You can make regular payments to help with another person’s living costs. There’s no limit to how much you can give tax free, as long as: you can afford the payments after meeting your usual living costs, you pay from your regular monthly income'.

Thanks everyone, this is really helpful. I'm.hoping not to die within the next 7 years, or to go into a Care Home!

It's not income in your son's hands so he wont need to pay tax on it