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Giving in UK, Gift Deed and Tax implications

If you are thinking of giving someone cash or assets you need to be very careful when doing this sort of thing as there are tax implications. Each circumstance is unique so get advice for your exact circumstances – however one thing that needs to be done in most cases is putting everything in writing using a Gift Deed.

In simple terms a Gift Deed is a formal legal document used to give a gift of property, money or shares/securities to another person. It transfers the money or ownership of shares/securities to another person without payment in return. Generally, money Gift Deed transfers are carried out between family members as property transferred in this way is usually given out of the love and affection the giver has for the recipient. Usually the document has to be witnessed and the witnesses have to be disinterested parties (ie should not have a stake in the transfer of the property).

It is easy to create a deed from a template or put something in a letter format but you could easily miss important terms which could have future implications. If a gift is worthy a couple of thousands, it might be worth engaging a legal/tax expert to help you with the gift deed a few hundred quid spent now could make a few grand or much more worth of difference later. If you pay for legal advice that advice is covered by the professional indemnity insurance of the lawyer, so if things go wrong you have recourse.

The key rules for giving in UK  are:

1.    The person receiving the gift is generally not taxed – if ever there is tax to pay, its usually the giver. Hence if the giver is outside UK, there is no tax issues to worry about.

2.    Generally, any gifts made to any individuals will be exempt from Inheritance Tax payments if the Donor lives for a total of seven years or more after having made the gift. If the Donor dies within seven years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on the value of the gift usually by the Donee or by the representatives of the estate.

3.    The donor can make small gifts up to the value of £250 to as many individuals as he likes in any one tax year with no tax implications whatsoever in UK. However, he cant give more than £250 and claim that the first £250 is a small gift. If he gives an amount greater than £250 the exemption is lost altogether.

4.    Wedding gifts/civil partnership ceremony gifts are exempt from tax (the amounts depend on whether it’s a parent, grandparent etc – see HMRC for the limits

5.    Regular gifts or payments that are part of your normal expenditure  like giving our grandmother say £400 if you have a net salary of £3,000 do not have any tax implications as long as you can prove that these are out of normal expenditure and your income supports that.


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