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 due is tapered as follows
- 32% after three years
- 24% after four years
- 16% after five years
- 8% after six years
- 0% 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.