Do I have to declare gifted money?

Gifted Money and Tax Implications

In the United Kingdom, receiving money as a gift is typically not subject to taxation. However, it’s important to consider the potential tax implications arising from the subsequent handling of these funds.

Taxation of Interest and Dividends

While the initial gift itself is exempt from taxation, any interest or dividends earned on the gifted money are taxable. This applies to both the original amount gifted and any accrued gains from investments made with those funds. Therefore, it’s crucial to keep accurate records of all gifted funds and any investments or interest-bearing accounts associated with them.

Record-keeping for Tax Management

To effectively manage potential tax obligations related to gifted funds, diligent record-keeping is essential. This includes:

• Recording the source of the gift: Documenting the details of the donor, the amount gifted, and the date received.
• Tracking investments: Maintaining records of all investments made with the gifted funds, including the type of investment, purchase date, and amounts invested.
• Monitoring interest and dividends: Regularly reviewing investment statements to track the interest or dividends earned from gifted funds.

By maintaining these records, taxpayers can accurately calculate the taxable income arising from gifted money and ensure timely payment of any taxes due.

Additional Considerations

In certain cases, gifted money may also be subject to inheritance tax, which is a tax levied on the value of an estate upon the death of an individual. However, there are specific exemptions and allowances that may apply, reducing or eliminating any tax liability. It’s recommended to consult with a tax professional for guidance on inheritance tax implications.