A lack of knowledge around gifting rules could see a large number of parents and grandparents risk tax bills, new research from Openwork has revealed.
Around one in five (20%) – the equivalent of 6.3 million people – have given gifts of £3,000 or more to family members without declaring it to HM Revenue & Customs.
Current tax rules allow gifts up to a total of £3,000 to be given each tax year without incurring a tax change. However, gifts worth more than £3,000 can be added to the value of someone’s estate if they’re given up to seven years before death and could mean tax bills for those receiving the gift.
Openwork’s research showed nearly half of (46%) of parents and grandparents are unaware that they could face a tax bill if they give money to children or grandchildren, while nearly two out of give (38%) did not know there were any potential tax risks from helping out families financially. Among those who were aware of the tax implications, 80% admitted to finding the rules complicated.
The adviser network warned that this could become a growing problem as first-time buyer deposits increase and families step in to help.
Mike Morrow, chief commercial officer, Openwork, said: “It is natural for families to want to help each other financially when they can and it’s becoming increasingly important given rising property prices and the financial impact of COVID-19. Unfortunately, it’s not that simple providing financial help and the Bank of Mum and Dad and Gran and Grandad need to ensure they are not opening themselves up to a tax bill or even possibly landing their relatives with tax issues.
“Professional financial advisers can help people with IHT planning and how to protect inheritances. They will provide support on how to navigate the potential pitfalls and ensure that everyone including HMRC receives what they are expecting and nobody is left with a surprise bill.”
