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When capital can become income contributing to excess income so no IHT.
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KMH
Posted: 10 February 2025 13:31:58(UTC)
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Another thread has started with the same question.
It would be helpful if someone can quote a professional answer to this.
On IHT 403, page 8, section 20, it has a list of boxes that it asks for details of "income".
This list has separate rows for "interest:" and "investments".
Is there HMRC information elsewhere which defines this?
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D Bergman on 10/02/2025(UTC)
D Bergman
Posted: 10 February 2025 14:36:32(UTC)
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KMH;333807 wrote:
Another thread has started with the same question.
It would be helpful if someone can quote a professional answer to this.
On IHT 403, page 8, section 20, it has a list of boxes that it asks for details of "income".
This list has separate rows for "interest:" and "investments".
Is there HMRC information elsewhere which defines this?


HMRC do not define everything; see below:

The legal concept of interest Interest is not defined in the Taxes Acts. It is a concept of common and contract law. Halsbury's Laws of England defines it as follows. “Interest is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another.
19 Mar 2016

meaning of interest - HMRC internal manual - GOV.UK

So HMRC expect you to use common sense (the "Man on the Clapham Omnibus" argument),

Given that both Interest and Investments count as Income for the purposes of Gifting from Surplus Income, it should not cause any problems if you happen to conflate the two; as long as you include all your gross income and deduct as instructed the tax paid, you will end up with the correct totals.
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KMH on 10/02/2025(UTC)
KMH
Posted: 10 February 2025 15:55:39(UTC)
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So, we conclude that selling an investment with a capital gain (then the gain is taken as income from the investment) is no different to dividends from an investment. Both go into the "investments box?

Obviously confusing as the question keeps being asked.

Many thanks to DB.
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D Bergman
Posted: 10 February 2025 16:14:57(UTC)
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KMH;333833 wrote:
So, we conclude that selling an investment with a capital gain (then the gain is taken as income from the investment) is no different to dividends from an investment. Both go into the "investments box?

Many people consider them different.

Many thanks to DB.


I might be missing something, but the way you state this is incorrect.

If you make a capital gain, that is not acceptable as income for the purpose of gifting from excess income.
The "investments box", as you put it, would be for regular profits from your investments without the need to sell them, such as dividends.
Sales of capital are not income in this context, they are capital gains.

FYI, in my spreadsheet of income & expenditure for gifting, I have boxes for dividends from shares & funds in my GIA, dividends from shares & funds in my ISA, and dividends from my VCTs.
I do so to clarify why my income tax payments are relatively low in relation to my income.
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Jay P on 10/02/2025(UTC), Geoff Fitz on 10/02/2025(UTC), KMH on 11/02/2025(UTC)
Geoff Fitz
Posted: 10 February 2025 22:38:46(UTC)
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It really shouldn't be this difficult and when people who have reasonable intellect continue to struggle to understand it then its the system which is at fault but we are where we are.

I now accept that it is not possible to sell investments and declare them as income even though that was my intention all along. I stopped paying into a pension and started paying into an ISA as being forced to buy an annuity at the time was such bad value. But there is no consideration of this in the rules.

But after much digging I have found (almost) the requisite level of income to cover my regular gifting. Here is how.

1. the GIA gives me a consolidated tax certificate. I know UK Equity income dividend from the transactions but UK Unit trust Dividend and UK Unit trust Interest come ' out of the blue' but can be forecast based on history. This data is actually needed if you wish to manage to stay below current tax thresholds as well.

2. If you ask the platform provider they will give you a consolidated tax certificate for your ISA HL will do it for free but II charge £3+ vat which actually is good value. They do not normally do it but the dividends and interest can be seen then used as income on the IHT 403

3. Interest from bank accounts and from cash holdings in various platforms also add up.

In my case I am fortunate in that the sum of 1+2+3 totals approx £9k as I want to give £1k/month as regular gift it means I have to only find a modest amount to cover the gifting.
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Guest on 11/02/2025(UTC), D Bergman on 11/02/2025(UTC)
D Bergman
Posted: 11 February 2025 13:50:32(UTC)
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Geoff,

Do remember you also have an annual £3,000 that can be gifted in addition to your Surplus Income gifting.

Also the £12,000 pa you're planning to gift doesn't have to be in regular monthly instalments - you can do it annually if more convenient.
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Geoff Fitz
Posted: 11 February 2025 15:23:38(UTC)
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D Bergman;333938 wrote:

Geoff,

Do remember you also have an annual £3,000 that can be gifted in addition to your Surplus Income gifting.

Also the £12,000 pa you're planning to gift doesn't have to be in regular monthly instalments - you can do it annually if more convenient.


Yes the £3K will also be given and my wife will also give £3K.

Giving it monthly is actually easier as I will up my SIPP payment.

In addition I had a discussion with HMRC ref the IHT 403 form and they confirmed that the investment line in the income section is dividends. The ISA interest and income is really helpful in covering the gifts as you don't see it but adds legitimately to the top line. Just confirming the comments you have made earlier.
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D Bergman on 11/02/2025(UTC)
paul armstrong
Posted: 12 February 2025 19:33:06(UTC)
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My father in laws estate went through probate a couple of years ago. He made regular Christmas gifts over 7 plus years and gifted holidays now and again. HMRC were happy these were gifts from income. Not that regular and varying amounts.
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Jay P on 12/02/2025(UTC), Geoff Fitz on 12/02/2025(UTC)
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