Taxation on monetary gifts

What are the rules surrounding taxation on monetary gifts from parents to children/children-in-law?

Is there a limit of �3000 per person per year before any monetary gifts are taxable?

I'd heard something about parents being able to give as much money as they wish to their children, but it would only become taxable if they die within 7 years of giving that gift.

Can someone please clarify the situation and also point me in the direction of an official website with up-to-date info on it (I've tried searching on the HM Revenue and Customs website, and I guess the information I'm after must be there somewhere, but I can't seem to find it).

Many thanks in advance
Karen
12:53 Sun 24th Feb 2008
 
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No tax on monetary gift that are genuine gifts. Seven year rule applies to some gifts but only affects inheritance tax liability. Just google inheritance tax rules on HMRC
Question Author
Right, having done some further research, I have come up to the following conclusions:

My parents can give a one-off tax-free gift (no matter how large), so long as they live for seven years after they have given it.

If the parent who gave the gift dies within seven years, the gift may be liable for inheritance tax, subject to the following:

If this parent�s estate is worth more than �300k (the current inheritance tax threshold) then the gift may be taken into account when calculating tax.

The first �3000 of the gift will be tax-free (�6000 if no gifts had been made the previous year).

Can someone please confirm if my conclusions are correct, or if I have got completely the wrong end of the stick/missed anything glaring?

Many thanks!
Karen
You are pretty much right but the �300K value of the estate is not static - it increases each year, & it is the limit at the date of death which applies. Also, the gift (excluding the �3K or �6K) is included in the estate in calculating whether it comes above the �300K limit. There is a sliding scale reduction in any IHT on the gift depending on how long before the death it was made, which reduces the liability if at least 3 years had elapsed.
There is a sliding scale reduction in any IHT on the gift depending on how long before the death it was made, which reduces the liability if at least 3 years had elapsed.


Only partly true - for the sliding scale to come into effect, the total of all potentially exempt gifts in the 7 years prior to death has to exceed the nil rate band.

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