Can I Just Gift £100k to My Son?
Yes, you can gift £100,000 to your son with no immediate tax charge. Neither you nor your son pays tax at the point of transfer, and your son does not pay income tax on the gift.
The catch is the 7-year rule. The gift is classed as a Potentially Exempt Transfer (PET) under the Inheritance Tax Act 1984. If you survive 7 years after making the gift, it falls completely outside your estate and no IHT is owed. If you die within 7 years, the £100,000 is brought back into your estate for IHT purposes.
It will first use up part of your £325,000 nil-rate band. If your total estate plus gifts exceed that threshold, the excess is taxed at 40%. A sliding taper relief reduces the IHT rate on the gift if you survive between 3 and 7 years.
You also have an annual exemption of £3,000 per tax year, which is immediately outside your estate. You can carry forward one previous year's unused exemption too, giving you up to £6,000 exempt from day one. So of that £100,000, roughly £94,000 sits as a PET subject to the 7-year rule.
Keep a clear written record of the gift, including the date and amount. HMRC can ask for evidence of gifts made within 7 years of death, and missing records cause real problems during probate.
The catch is the 7-year rule. The gift is classed as a Potentially Exempt Transfer (PET) under the Inheritance Tax Act 1984. If you survive 7 years after making the gift, it falls completely outside your estate and no IHT is owed. If you die within 7 years, the £100,000 is brought back into your estate for IHT purposes.
It will first use up part of your £325,000 nil-rate band. If your total estate plus gifts exceed that threshold, the excess is taxed at 40%. A sliding taper relief reduces the IHT rate on the gift if you survive between 3 and 7 years.
You also have an annual exemption of £3,000 per tax year, which is immediately outside your estate. You can carry forward one previous year's unused exemption too, giving you up to £6,000 exempt from day one. So of that £100,000, roughly £94,000 sits as a PET subject to the 7-year rule.
Keep a clear written record of the gift, including the date and amount. HMRC can ask for evidence of gifts made within 7 years of death, and missing records cause real problems during probate.