You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
Let's say that Mr & Mrs Smith have £26k left to pay on their mortgage.
Mrs Smith 82 year old mother wants to pay off the said £26k balance bit is told she's not allowed to, even though she has the money she's told she can only "gift" £250.
https://www.gov.uk/inheritance-tax/gifts
Surely it's her money and she can do with it what she wants.
Is there any way around this silly system for Mr & Mrs Smith?
If you read on on that link, you can but it'll be considered under IHT calculations if she dies within 7 years.
There are ways of avoiding the taxes of the land, I'm sure.
Obviously, this is fine if you are an 82 year old generous person, but not if you are a major multinational.
Withdraw the cash over a month. Pay into you r account and then pay it off. Keep it below £2k transactions.
Mr and Mrs Smith could sell her some magic beans for £26k.
IANAFA.
Actually jambo gave the easiest solution. Look after her very well for 7 years afterwards.
only an issue if mr & mrs smith expect to inherit in excess of £325000
And if you are risk averse and she is in decent health then take out 5 term assurance plans for 7,6,5,4,3 years each plan for 20% of the amount of the inheritance tax, or a bespoke gift inter-vivos plan.
Steer clear of the funeral plans and go to a financial adviser for a cheaper advised policy. Most of the main companies cover up to age 83 some go to 89.
More that Mrs Smith's estate needs to be over £325k, regardless of who is inheriting. There is new legislation coming in (might be this April) that lets the primary residence be taken out of the calculation.
Cash. Might cause issues if trying to claim for a care home for the old dear for a few years but if she just wastes it
Balls. Long and detailed answer posted but deleted on sodding tablet. No body can question how much she withdraws.
For starters (as the link makes clear) she can gift £3k per year, and there's a year carry-over, meaning 6k before april and another 3k straight after, all completely free from IHT considerations. If the couple were recently married, that's another 5k as a wedding gift. Perhaps a minor detail, but she could also give 250 quid to one of the couple, free of any tax (the one that didn't get any other gift). Once before and once after April is 500 quid. The remaining 16500 (excluding the wedding which seems a long shot), of course she can make a gift (where on earth did you get the idea that she couldn't?), the only catch is that there may be a tax liability of at most 40% of this if she doesn't survive another 7 years and if her total estate (including this gift) exceeds the IHT threshold.
No body can question how much she withdraws.
Exactly. She can just say she has a problem with fixed odds machines at the local bookies. A £500 a day problem.
Thanks for the replies.
How can anyone official really notice in the big bad world of banking and tax scheme of things if she draws out a couple of grand in cash 13 times every other week/month or so from Bank A?
Then Mr Smith (different surname of course) pays the odd thousand pound in cash to Building Society B here and there over the same period of time?
Mr and Mrs Smith, have recently paid in 2 large lump sums without anyone asking where the money came from, so how can the above 2 scenarios be linked together?
Probably no-one will notice if you attempt tax fraud in this way. If she survives 7y then there's no tax due and no fraud anyway (though maybe you are supposed to list the PET on a tax form, it's not something I've had reason to do yet). On the other hand, it's possible that the authorities will notice and investigate further, if she doesn't survive long, and is noted to have made large cash withdrawals in the last few years of her life, around the same time that the wealth of her relatives mysteriously increased....
Probably no-one will notice if you attempt tax fraud in this way.
Wasn't it a Mr Smith doing the tax fraud here?
She needs better financial advice from someone she pays
Thanks all
I'll tell Mr Smith
Yeah, it's my understanding (which may well be wrong) that it's not a problem for the 82 year old mother to draw out the money in cash and claim she spent it, the problem will arise when Mr and Mrs Smith have to explain to the Tax man about where the mysterious 26k came from, and why it wasn't declared and taxed as income?
It's either a gift or it's not, so I don't think you can treat it as a gift from Mr and Mrs Smith's position, but not from the 82 year old mother's position.
She can do what she wants, it will be taxable though 🙂
It is indeed possible to commit fruad and evade tax
If planning on tax evasion I'd definitely discuss it on a public forum first.
Cos at least one of us works for HMRC.....
😈