Gifting Money

[Maax]

Hi all, I have tried various sites for advice but googling this issue lead me to mumsnet on more than one occasion, therefore I thought I would give it a try.

Late 2024 my mother loaned me £5000. Again in early 2025 I loaned another £5000. To be honest I didn't really needed it but it made my mother feel good to be doing something for me. I would have started to pay her back towards the end of this year (2025), however she has sadly passed away. I am really struggling to know what to do. My mother had perhaps a small amount in her account, lets say around £25k. As Executor I have closed her bank and have just had word they will transfer into a new account I created (as advised) to then share monies to my brother and sister. At this point we haven't even had her funeral yet. My anxiety is growing over this £10K and I have told my siblings that I have this money and by rights, one third each is there's. Once funeral was over I planned to simply pay them £3333 each. However I read about gifting only £3000 per year total otherwise more than that would be taxed at 40%. So that would mean £1.5k each then £1.5k next year (i guess after tax year?). Is this correct. I dont think I can pay it back to her account now she has gone and also I think the account is closed. I am also thinking that tax wise this will show up somewhere down the line as a £10k gift to me as it was in the same tax year and I will have to pay a minimum of £4000. Really struggling with this.
My thought is that I assume I will receive a tax bill for the amount of £4k in a year or so. So should I now gift/give my siblings only £2k each and then make that over two years. Although I read that you can perhaps do a total of £6k in one year but not gift any the next year?

Not sure if I mentioned that I have already told my siblings about the£10k and implied I would be transferring them around £3k each.
I know they will totally understand if it has to be less than that.

Help, I am stressing so much about this.

x Max

The gifting limits relate to inheritance tax. This is only payable on estates of over £325k (£500k if it includes the property the deceased lived in and that is being left to children and/or grandchildren). If her total assets (property, cash, anything else) are less than this, there is no tax to pay on these gifts.
You mentioned £25k in other accounts. Did she also own a house?

Hi Posie, no only the 25k and effectively the 10k with myself. The £10k was before he death so is this not assumed a gift now she has passed on as I cant repay her. This then coming under gifting which is £3k before having to pay tax?

It is a gift, but as PP says, gifts are not taxed just for being gifts. They would be added to the total of the estate, and if the total was over £325k, then they would be liable for tax. As the total is only £35k, there is no tax to pay on any of it.

THe OP seems to make it clear that both she and her mother treated the money as a loan, not a gift. In which case I'd say it should be treated as a debt to the estate, and deducted from her share of the inheritance (with her paying money to her siblings if the share does not fully cover it).

Your best course of action is to repay the £10k into your late mum’s estate’s new account. Then you can distribute the £35k to the 3 siblings (yourself included).

However, remember that you paying back the loan (which is owed to your mum’s estate) is not a gift; and you don’t have any inheritance tax issues with such a small estate.

Thanks Barnacle, I am aware of the £325K number. But as this was a gift in effect before my mother passed away does it not get taxed. If I google how much can I gift my daughter it clearly states £3k can be gifted in total per year before tax.

If this is not the case, would I not have this problem then paying my siblings share to them?

Or would it be best to leave that £10k with me as my third of the £35k, pay them both £11.7k each and the last £1.7k to me so we are all equal.

Really sorry for my lack of understanding in this situation.

your advice is greatly appreciated.

this is what I thought but I know believe the account is closed as the £25k has been payed into the holding account :-(

Yes, the £3k limit is how much you can give away before it has to be counted as part of the estate for IHT purposes. So theoretically, if this were a gift, you would count it as part of the estate, the total would be £35k, and there would be no IHT payable. As other PPs say, though, it's still a loan even if your mum has now passed away, so you just count it as part of the estate anyway, and reduce the share paid out to yourself because you've already got most of yours. You don't need to put it back in your mum's account, just keep a written record of all her assets:
Bank balance: £25k
Loan to Maax £10k
Total: £35k.

The rules are that £3k can be gifted per year without it being potentially subject to inheritance tax. But because your mums estate is nowhere near big enough to pay inheritance tax there is no tax due on these gifts

so do we think it would be best to pay the 10k into the holding account and then from there to my siblings and my bank account?

thanks again.

No need to pay it anywhere, as long as you have a clear record as I posted above. You add up all the assets which includes the loan owed to the estate by you, then you divide up the total between the beneficiaries, then you pay your siblings their share and keep the rest.

You need to pay the funeral and all her outstanding debts first. Then pay the remaining money to the beneficiaries. If she has £25k left after everything is paid you add your £10k and then divide by 3. That's 11666 each. So you get 1666 and they get 11666 each. You don't have to actually put the money in but just account for it in the figures.

thanks to all, I feel a little more at ease now.

Have a great weekend.