Family gifts and Inheritance Tax


One important aspect of giving money to assist in the purchase of a home (however the purchase is structured) is that it constitutes what is termed as a Potentially Exempt Transfer (PET for short).
 

A PET is the name given by HM Revenue & Customs to a gift over and above £3,000 per annum to any third party.

The implications of a PET are that you must survive the gift by seven years otherwise the amount of the gift is added back to your estate for the Inheritance Tax calculation and may be taxed if your estate is of a certain value. The tax is payable by the person who has received the gift in proportion to the amount of the gift that they have received in relation to the value of your whole estate. If they are unable to pay the tax the Revenue can come against the estate as a second option for payment.

If the amount of the gift means that you exceed your Inheritance Tax Nil Rate Band, currently £325,000, then the tax is tapered as follows

  • 20% after three years
  • 40% after four years
  • 60% after five years
  • 80% after six years
  • 100% after seven years

Don’t get caught out

If you are thinking of gifting your child money towards their new home please contact us to find out the implications over the longer term – we may be able to help you structure the arrangement in a way that best serves both your interests and those of the family member you are gifting the money to.

Property solicitors for PET planning

Wellers Law Group’s property solicitors can help with all aspects of third-party property purchases, including those relating to guarantor mortgages, gifted deposits, Inheritance Tax and PET planning.

If you would like experienced legal advice to help you consider your options when gifting money to a family member, contact us today for more information. We have solicitors in our offices in London and the Southeast but can help you wherever you are in the UK.

Call today or fill out an online enquiry form.

  • London
    London City office: 020 7481 2422
  • Bromley
    Bromley office: 020 8464 4242
  • Surrey
    Surrey office: 01483 284567
  • Sevenoaks
    Sevenoaks office: 01732 457575
  • Chislehurst
    Chislehurst office: 020 8295 1989