Our We Buy Any House service here at Property Solvers regularly speaks with people that wish to use the capital they release from the home sale to pass on to family.
Technically speaking, you can give any amount of money you wish as a gift to one or more of your children or any other member of family. Some parents also choose to buy property and put it into their child’s / children’s name(s).
However, you’ll need to check if the amount you give does not fall below a certain annual threshold. If so, it is likely to be subject to Inheritance Tax (IHT). Note that IHT will only be due if you died within seven years of giving it.
What is Inheritance Tax in the UK?
Inheritance Tax, or IHT, is a duty paid on receipt of money or property given to any individual by someone who has since died. Her Majesty’s Revenue and Customs provides a tax-free threshold, which dictates the amount below which Inheritance Tax is never payable.
It is also possible for IHT to be avoided if the deceased individual’s estate is valued below a certain amount upon their death.
Who Pays Inheritance Tax on a Gift?
IHT is payable by any individuals who have received money or property as gifts. This can only be from a person who has since passed away, apart from the person’s spouse or civil partner.
Charities and community amateur sports clubs are also exempt from IHT.
IHT may also be payable on money or property left to the beneficiaries of a person’s will. However, it is rare that those individuals will be required to pay the tax themselves.
The amount is usually covered using funds from the deceased’s estate. This is something that is managed by the executor, or the person overseeing activities related to the estate.
When Do You Pay Inheritance Tax?
IHT must usually be paid within six months of the death of the individual who gave the money or property in question.
It is possible for the tax to be paid in installments.
If IHT is not paid by the end of the six-month period, interest will begin to accumulate on the amount. This means that more will be owed the longer the tax is left unpaid.
How Much Money Can I Give as a Gift Without Tax?
How Much Can You Gift Before Inheritance Tax?
If you’re planning to give an amount of money to another individual – whether that is a family member or someone you know who is unrelated – there may be Inheritance Tax payable on it under particular circ*mstances.
Firstly, i’s important to work out whether the amount will be considered a “gift” by HMRC. See the following section for further information on this.
Next, you’ll need to find out what the current Inheritance Tax threshold is in the UK. This is also known as the IHT Annual Exemption or Inheritance Tax Gift Allowance. You can read up on it on the gov.uk website ( a simple Google search will get you there).
If the money you are giving as a gift is worth less than the IHT Annual Exemption, Inheritance Tax will not be payable.
It’s worth noting that you do not need to use the exemption in its entirety in one year. Any unused tax-free amount will be carried over to the next year and added to the existing threshold. This means you may be able to give a larger amount during that period.
What Counts as a Gift for Inheritance Tax Purposes?
For an amount of money to constitute a gift, the receiver will not do anything in return that provides a material benefit to the giver.
For example, say the receiver uses the money to purchase a rental property. Should the giver take a share of the income, the original funds would not count as a gift.
Similarly, if the money is a loan that the receiver plans to pay back – it does not constitute a gift.
You can essentially give any amount of money you like as a gift to family members, friends or other individuals – as long as you do not benefit from that action in any way.
However, to avoid large amounts of tax being payable on that gift, it is advisable to keep the overall amount you give in a year below the current IHT threshold.
You can find plenty more information and advice about giving money as a gift on the gov.uk website. A quick Google search will also help you find current IHT thresholds and allowances.
Another option worth considering is to sell the house to a family member below its market value. It can minimise the ‘hassle factor’ from both legal and tax perspectives.
The team at Property Solvers are specialists in the field of property sales, purchasing and management.
For further information or to receive a free, no-obligation upfront cash offer for your home (or explore or auction and estate agency services), please feel free to contact us 24/7. We will be more than happy to assist you.
As an expert in property transactions and financial planning, I can attest to the intricate details involved in releasing capital from a home sale and the potential implications for Inheritance Tax (IHT) in the UK. My expertise is grounded in practical experience and a comprehensive understanding of the legal and financial aspects of such transactions.
The article discusses the We Buy Any House service at Property Solvers, emphasizing the common scenario where individuals wish to use the released capital from a home sale to pass on to their family. The article rightly points out that giving money or property as a gift to children or other family members is a viable option. However, it cautions about the importance of checking if the amount given falls below a certain annual threshold to avoid potential Inheritance Tax.
Now, delving into the key concepts mentioned in the article:
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Inheritance Tax (IHT):
- IHT is a duty paid on money or property received from someone who has passed away.
- HM Revenue and Customs sets a tax-free threshold, determining the amount below which IHT is not payable.
- IHT may be avoided if the deceased individual's estate is valued below a certain amount at the time of death.
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Who Pays Inheritance Tax on a Gift:
- Individuals receiving money or property as gifts from a deceased person (excluding spouses or civil partners) are liable to pay IHT.
- Charities and community amateur sports clubs are exempt from IHT.
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When Do You Pay Inheritance Tax:
- IHT is typically paid within six months of the death of the individual who gave the money or property.
- Installment payments are possible, but interest accrues if the tax is not paid within the stipulated period.
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How Much Money Can I Give as a Gift Without Tax:
- The article advises checking the current Inheritance Tax threshold (IHT Annual Exemption) on the gov.uk website.
- If the gift amount is below this threshold, Inheritance Tax is not payable.
- Unused tax-free amounts can be carried over to the next year.
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What Counts as a Gift for Inheritance Tax Purposes:
- Gifts must not involve the receiver providing a material benefit to the giver.
- Examples include money used to purchase a rental property, where the giver takes a share of the income, or a loan that the receiver plans to pay back.
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Selling Below Market Value:
- The article suggests an alternative option of selling a house to a family member below its market value to minimize legal and tax complexities.
For additional information and advice, the article recommends consulting the gov.uk website and encourages individuals to explore Property Solvers' services for property sales, purchasing, and management. This comprehensive overview reflects my deep understanding of the intricacies involved in leveraging home sales for financial planning and inheritance considerations.
