Giving a present.

[Drahcir]

My son's 21 near the end of the year. I would like to give him a present, which should be a surprise for him if at all possible. Some investment seems a good idea. Perhaps £21,000. He does not yet earn enough to purchase a house and pay a mortgage, so I was thinking of something to assist in a purchase.

I don't think I can put money into an ISA and transfer it. I could wait and just write him a cheque (he might not have received one before!). Is there some tax-efficient and cost-effective thing I can emplace and give, as a surprise? I would guess it will be a few years until he uses it.

I am unsure what would happen to my own tax situation (and his) if I give him £21,000. I am a greenhorn. Please be gentle!

[pje16]

The tax man will want his slice but you're if you live for another 7 years
very annoying in my view as tax has been paid on it already (presumably)
https://www.raisin.co.uk/taxes/gifting- ... -children/
https://www.gov.uk/inheritance-tax/gifts

PS Welcome to the Forum

[Gerry557]

You should estimate your net worth to see if you are likely to be in the IHT bracket £325k.
Are you married? you are able to transfer your allowance to the spouse, thus £650k.
Leaving the house, if you have one, to children or grandchildren can give you up to £1m.

The 21k will be seen as a gift from your estate unless you live 7 years. You can give him £3k this tax year, be quick and another £3k next. That reduces the amount to £15k possibly liable.

Also factor in what you might be worth in the future such as adding more savings, reducing debts and house price changes.

[Drahcir]

The tax man will want his slice but you're if you live for another 7 years
very annoying in my view as tax has been paid on it already (presumably)
... gifting-money-to-children/
... inheritance-tax/gifts

PS Welcome to the Forum

Thank you for your thank you. It's likely I'll be an occasional visitor at least, it's an interesting place.

As for paying tax if I peg out, well! D- cheek! I will have to consider this (if I kick the bucket, though, I won't need to).

[Drahcir]

You should estimate your net worth to see if you are likely to be in the IHT bracket £325k.
Are you married? you are able to transfer your allowance to the spouse, thus £650k.
Leaving the house, if you have one, to children or grandchildren can give you up to £1m.

The 21k will be seen as a gift from your estate unless you live 7 years. You can give him £3k this tax year, be quick and another £3k next. That reduces the amount to £15k possibly liable.

Also factor in what you might be worth in the future such as adding more savings, reducing debts and house price changes.

Thank you. I am not currently married. He will be my sole major beneficiary, apart from a couple of 1%s. From pje16's link, I note I can roll over the previous year's gift allowance, so I could give £6,000 this year (if quick) and £3,000 next year by the look, which isn't enough, so I may have to just say "Oh, blow, I won't go for another 7 years", not a hard thing to say.

Have I read somewhere that he would be liable for tax, if he receives over his capital gains allowance in one year (£12,300)?

I am beginning to become confused already, as well as outraged.

The other thing is trying to make it so that he does not know until his birthday. That's looking unlikely.

[swill453]

Have I read somewhere that he would be liable for tax, if he receives over his capital gains allowance in one year (£12,300)?

No, nothing like that. There's basically no tax on gifts, donor or recipient. The money's yours to do with as you like.

As has been pointed out, the possible issue is that it could be counted as still being part of your estate if you don't live long enough. You can consider that that wouldn't be an issue for your son, though.

Scott.

[SalvorHardin]

Thank you. I am not currently married. He will be my sole major beneficiary, apart from a couple of 1%s. From pje16's link, I note I can roll over the previous year's gift allowance, so I could give £6,000 this year (if quick) and £3,000 next year by the look, which isn't enough, so I may have to just say "Oh, blow, I won't go for another 7 years", not a hard thing to say.

Have I read somewhere that he would be liable for tax, if he receives over his capital gains allowance in one year (£12,300)?

I am beginning to become confused already, as well as outraged.

The other thing is trying to make it so that he does not know until his birthday. That's looking unlikely.

There is a rule where regular gifts made out of surplus income are ignored for inheritance tax. As long as making the gift does not reduce your standard of living and the gift clearly comes from income (i.e your income is more than enough to live on), then the gift is ignored for IHT. Lots of accountants and IFAs have articles talking about this; the link below appeared first in the list when I searched Google.

https://www.tilney.co.uk/news/how-do-i-make-regular-financial-gifts-from-surplus-income

You are not liable for capital gains tax on gifts made or received. Capital gains tax only applies when you sell assets, and then only if your total realised gains exceed the £12,300 allowance (and there are a few assets which are exempt, notably your primary residence).

[Drahcir]

You are not liable for capital gains tax on gifts made or received. Capital gains tax only applies when you sell assets, and then only if your total realised gains exceed the £12,300 allowance (and there are a few assets which are exempt, notably your primary residence).

OK. So I could perhaps start an ISA, pay into it the maximum this year, pay a bit more next year, and then (assuming value hasn't sunk like a stone) sell some of it & give him the cash (or just sell assets this year, stick the cash under the mattress, then sell more assets to get to £21,000 total next year, and then give him the cash, whereupon IHT would taper off to £0 should I survive 7 years?

[DrFfybes]

Ignoring the "birthday surprise" element, if you really want him to get something towards a house, you could consider opening a LISA with/for him. The taxman helpfully adds 25% to the investment, which is an instant win. Available from loads of places, Hargreaves Lansdown would be a reasonable place as they are easy to use and if he invests in ETFs then the annual charge of 0.45% is capped at £45/year once it gets to £10k invested.

If you are really worried about dieing within 7 years, you could give him £6k this week, he can put put £4k into it this tax year, and the rest after next week. You then have a choice later in the year, £21k on his birthday, or £15k, or whatever.

As these are gifts you have no real say in what he does with the money, so seeing what he does whith this would be a gauge.

OK. So I could perhaps start an ISA, pay into it the maximum this year, pay a bit more next year, and then (assuming value hasn't sunk like a stone) sell some of it & give him the cash (or just sell assets this year, stick the cash under the mattress, then sell more assets to get to £21,000 total next year, and then give him the cash, whereupon IHT would taper off to £0 should I survive 7 years?

Wow, are you complicating things

Unless you are not expecting to last 7 years, forget about IHT for the moment. what you are doing is sorting out a birthday pressie for your son and hoping he'll plan for the future. If you do die within 7 years, he doesn't have to pay anything back, all that effectively happens is that the value of the gift is added back to your estate for valuation purposes. If you are worried about IHT planning, that is a different bucket of monkeys.

You are also now talking about starting an ISA, do you mean in your name, or his? Do you not have ISAs of your own? I'm pretty sure you can't open one for him anyway as he is over 18, he has to open his own, which will spoil the birthday surprise.

Paul

[swill453]

If, as you say, you want to give £21,000 later this year then it should really be in cash now. Leaving it, or worse putting it, in the stock market with a view to liquidating it in such a short time is just gambling.

So yes, stick it under your mattress.

Scott.

[Drahcir]

Wow, are you complicating things

I have been reading financial stuff, and, by God, my head is spinning. Financial stuff does that to me.

IF I ask him to start a LISA (possibly a "stocks & shares" one (which I assume includes things like investment trusts, is that right?), not a cash isa), and give him £6,000 to bung £4,000 of it in, can he start another ISA this year (again, not a cash one), and put the remaining £2,000 into that?

Edit: I see at "Bestinvest": "For example, you can’t pay into two Stocks and Shares ISAs in the same tax year"! Does that mean the above isn't a goer?

I am beginning to feel (Edit: really very) very thirsty.

[tjh290633]

My son's 21 near the end of the year. I would like to give him a present, which should be a surprise for him if at all possible. Some investment seems a good idea. Perhaps £21,000. He does not yet earn enough to purchase a house and pay a mortgage, so I was thinking of something to assist in a purchase.

You can give as much as you like "out of your income", provided that it does not affect your current lifestyle.

If you have £21k spare out of income, you can give him that, or split it over two years.

TJH

[Lootman]

I am unsure what would happen to my own tax situation (and his) if I give him £21,000.

Gifts are one of the very few ways (possibly the only way) that money or value can be transferred between non-spouses without attracting some kind of tax. You could gift someone a billion pounds and not only is no tax due, but it doesn't even have to be reported. (The one exception is if the donor then dies within 7 years and is subject to UK IHT, as others have noted).

You should be sure not to reserve any benefit as part of the deal, as then the 7 year clock won't start ticking. Occasionally staying at your son's house that was partially bought with this money won't count as a benefit.

[Howard]

My son's 21 near the end of the year. I would like to give him a present, which should be a surprise for him if at all possible. Some investment seems a good idea. Perhaps £21,000.

Do you trust your son?

If you do, don’t overthink the situation, just give him a cheque for £21,000 on his birthday.

He (and you) will remember it fondly for the rest of your lives.

What a brilliant investment in the future! One which will never go down.

regards

Howard

[TUK020]

If you want to guide him a bit more, then you could do the following:

Explain now that you have a bit of a surplus that you would like to put towards a future house purchase
Get him to open an ISA/LISA (he is over 18, so he has to do it). Do you homework on the mechanics of this, and what platform/investments to use etc.
Transfer 4k to him now, that he can put in this years LISA allowance, getting an extra 1k from HMRC.
This gets you into conversations about:
- saving for a property purchase & deposit
- tax efficient methods of saving
- investments and the whole subject of risk/reward

Come his birthday, transfer another 15k as a surprise, he can then put 4k in next years ISA allowance, and the remainder into a S&S ISA, or even hold back a bit to spend on a car etc.

From my experience with my kids, the whole subject of house prices and saving for a deposit is something that they and their peers think they have been generationally shafted on. They are very appreciative on being given hope for help in getting started.

[Lootman]

the whole subject of house prices and saving for a deposit is something that they and their peers think they have been generationally shafted on. They are very appreciative on being given hope for help in getting started.

They all think they have been shafted until they get a gift from the bank of mum and dad.

[DrFfybes]

Wow, are you complicating things

I have been reading financial stuff, and, by God, my head is spinning. Financial stuff does that to me.

IF I ask him to start a LISA (possibly a "stocks & shares" one (which I assume includes things like investment trusts, is that right?), not a cash isa), and give him £6,000 to bung £4,000 of it in, can he start another ISA this year (again, not a cash one), and put the remaining £2,000 into that?

correct, he can do.

However... I don't think you can transfer between S&S ISA and LISA, I think you have to withdraw the money and pay it back in again, so it might be worth just waiting a week and topping the LISA up after next week. Unless you plan to use his total £20k ISA allowance up next year as well

Edit: I see at "Bestinvest": "For example, you can’t pay into two Stocks and Shares ISAs in the same tax year"! Does that mean the above isn't a goer?

I am beginning to feel (Edit: really very) very thirsty.

You can't invest into 2 S&S ISAs in one tax year, but you CAN invest in a LISA and a S&S (or Cash) ISA in the same year.

The only restriction is that the amount you put into the LISA forms part of the £20k total annual limit for putting into ISAs (say (£4k into LISA and £16k into S&S ISA).)

Of course what to invest in once it is in there is yet another discussion. The main thing is to choose a platform provider and get them open and get the cash in, you can choose where to invest it later.

Paul

[pje16]

You can't invest into 2 S&S ISAs in one tax year,
Paul

Strictly true
but you can open one and transfer into an existing one

[Dod101]

My son's 21 near the end of the year. I would like to give him a present, which should be a surprise for him if at all possible. Some investment seems a good idea. Perhaps £21,000.

Do you trust your son?

If you do, don’t overthink the situation, just give him a cheque for £21,000 on his birthday.

He (and you) will remember it fondly for the rest of your lives.

What a brilliant investment in the future! One which will never go down.

regards

Howard

I was about to say exactly the same. Just go ahead and give him the money. Life is for living and enjoying not for thinking of ways to avoid tax that may never be an Issue (IHT) or ISAs and so on.

After the event you can tell him about ISAs and so on but that is secondary. Just do it!

Dod

[TahiPanasDua]

Everybody is different so there may be no easy answer.

For example, my 2 sons at that age would have partied the cash away in jig time. Now in their 40s, one could be absolutely trusted to do something sensible. The other I wouldn't trust with the loose change in my pocket.

That's life!

TP2.