Inheritance Tax - normal expenditure out of income.

Hello, I am trying to find out if there is a cap on payments from the normal expenditure out of income? I understand that these should be within someone's means (taking into account living costs etc) and it should be paid from a regular monthly income. How would you differentiate between this and gifts of money that exceed the £3000 threshold? Thanks in advance.

Hi

It's not clear what the payments from the normal expensidure out of income ar for.  Do you mean living costs?  
For inheritance tax purposes, you would need to keep a record of gifts of over £3000 in a tax year, for inhertance tax purposes.  
Please have a look at the guidance on inheritance tax at (How Inheritance Tax works: thresholds, rules and allowances).

Thank you

Hi, thanks for your response. For example, a monthly standing order payment of £600 to the recipient (who is over the age of 18) to supplement the recipient's income? i.e. effectively to help with the recipient's living costs and to support the recipient to build up savings of their own. Please see the guidance below from HMRC. The guidance states 'theres no limit' so does this mean there is no cap? You can make regular payments to another person, for example to help with their 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 These are known as ‘normal expenditure out of income’. They can include: -paying rent for your child -paying into a savings account for a child under 18 -giving financial support to an elderly relative If you’re giving gifts to the same person, you can combine ‘normal expenditure out of income’ with any other allowance, except for the small gift allowance. For example, you can give your child a regular payment of £60 a month (a total of £720 a year) as well as using your annual exemption of £3,000 in the same tax year.

Hi Char15,
Please have a look at the guidance here on making regular payments:
Rules on giving gifts
The guidance advises,
'There’s no limit to how much you can give tax free to another person, for example to help with their living costs, as long as (1) you can afford the payments after meeting your usual living costs and (2) you pay from your regular monthly income'.
The guidance does not stipulate what the gift must be used for.
Thank you. 

 

How is the expenditure of replacing the roof on a house classified for gifting out of income calculations please? Is it part of normal living expenses ?

Hi,

For advice on this matter, you will need to contact the Inheritance Tax team.

Inheritance Tax: general enquiries

Thank you.

Hello, the rules state that a grandparent can pay into a savings account for a child. Does the savings account have to be in the child's name? I'm asking because most of the children's savings accounts need to be administered in branch or via post which makes it very awkward to use the money to pay for school fees, which is what the money is for but it won't be used for another couple of years until the child turns four.

Hi,

Please contact the Inheritance Tax team for advice.

Inheritance Tax: general enquiries

Thank you.

I have had a look at the page and it says the phone line is only for when someone has died and they don't advise on how to pass money on to your family. Can you please give me details for the right people to contact to get an answer?

If my parents were to make regular payments out of normal income to myself and my siblings, for cost of living expenses, does this then count as income for us and are we liable to pay income tax on it?

Can the £3000 gifting allowance come out of my capital eg from sale if shares. And not be part of my expenditure when working out excess income over expenses. Thank you

Hi Victoria Lait,
There are no Income Tax implications on the receipt of a cash gift unless the cash gift generates interest or dividends. These would then potentially be subject to tax. Further guidance can be found here:
Tax on savings interest
Tax on dividends
Thank you.

Hi Stevan berry,
Please contact the Inheritance Tax team for advice.
Inheritance Tax: general enquiries
Thank you.