TaxPersonal TaxCash Xmas gift could be taxing affair

Cash Xmas gift could be taxing affair

Ernst & Young is warning parents about the tax implications of putting money aside for their children as a Christmas present.

Link: Companies failing to show Xmas spirit

According to the firm, money put aside is taxed as if it were part of the givers own income, while the child remains unmarried or under the age of 18, unless the income is under £100 per year.

Money from grandparents and relatives is not treated in the same way though, which can be used during the child’s minority and set aside against the child’s personal allowances.

Paul Knox, director in Ernst & Young’s private client services practice, said: ‘It is worth remembering though that any substantial gift to another individual can have inheritance tax consequences if the donor dies within seven years.

But he said there are two exemptions, One, you can give up to £3,000 per year without any inheritance consequences. Secondly an individual can gift up to £250 per annum per person but if that limit is exceeded, then the whole amount could potentially be subject to inheritance tax at 40%.

‘The good news is that gifts between UK resident spouses can usually be made without any tax consequences at all, which is perfect if you are looking for a grand gesture but want to avoid giving the tax man a present,’ Knox said.

Related Articles

HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

1w Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2w Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

2m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

4m Emma Smith, Managing Editor
Rangers tax case to have ‘dramatic’ consequences for football and business

Legal Rangers tax case to have ‘dramatic’ consequences for football and business

4m Emma Smith, Managing Editor
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

3m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

3m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

3m Alia Shoaib, Reporter