That's incorrect.
Tax bands, credits and exemptions mean that you don't pay tax on all of your income.
That's incorrect.I'm a PAYE employee, I pay tax on all my income.
This is also incorrect.I agree, this is earned income. Tax paid at 51%.
I have done this for a number of clients who have kids over 18 and there hasn't been a problem. You put it in a 28 day notice account or another hard to get at account such as the post office or and investment account. If you put it in their current account it will be spent and you'll only have yourself to blame. Leave it out of reach, and it will be fine.Is this true, that CAT is not required for a gift of a house deposit or to pay for a wedding? How does the revenue deal with these?
I thought that say if I gave my child €21K in 7 years time to use as a house deposit, that she would have to pay tax, but if I gave her €3K per year for the next seven years she would not need to pay tax? My only problem was fretting she would waste it partying, and holidaying in the next few years. She has just finished university where I paid €3K per year in “fees”, so it seemed a good idea to me to keep doing this.
It is true that not a lot of people know about the €3K gift exemption. My mother wanted to give 2 specific grandchildren cash gifts but did not want to exclude any other grandchild. She was also talking about paying specific costs on their behalf, which varied in value so she was fretting about fairness. so I explained to her about the small gift tax exemption. She was delighted that it was all above board and had a specific limit and organised it for them all. All the grand kids late teens, early 20’s were chuffed.
people would find ways round it.
Let’s not forget that gifts are effectively tax-free in the UK.
They adopt the logic that when a person dies, the State takes some of their assets.Yes. And that makes no sense.
There is a tax on a person's estate but not on the beneficiary.
Brendan
Technically you are correct however if you look closer the €3k is taxed at the 51% as most people spend up to 42k (assuming a married couple and tax band etc) on day to day expenses, mortgage payments, etc.That's incorrect.
Tax bands, credits and exemptions mean that you don't pay tax on all of your income.
Whereas a person should be free to do whatever they like in terms of gifting their own cash.
Parents already spend €6k - €7k per year for children for private schools plus a lot if extras on top, so can’t really see why anybody should get too worked up over this €3k annual exemption
I am at a loss why you are even considering this.I am writing my submission to the Commission on Tax and Social Welfare
I had initially suggested making the €3,000 Small Gifts Exemption from CAT cumulative but now I think it should be completely reformed in light of subsequent comments.
The rationale for exempting occasional small gifts from the administrative burden of CAT is a good one.
However, it has become an integral part of tax planning with wealthy couples giving their children €6,000 a year over a period of 30 years. Thus a person gets €180k of gift tax exemptions on top of the already generous €335k threshold.
Option 1 - Abolish it completely
I can receive gifts up to €16,250 cumulatively anyway. So if I get a gift of €3,000 from a friend, it's exempt from CAT anyway.
If I get €3,000 a year from a parent for 30 years, then my €335k threshold should be reduced by this amount.
The more I think of it, this really is the best option.
An occasional small gift is exempt anyway so the exemption is not needed.
The child is not getting 7k a year rather they are going to a school which should ensure they achieve an education that should secure them well paid employment. This well paid employment will result in income tax revenue and ensure they will be net contributors to Revenue in the future.So the kid is getting €7k a year in private school fees.
Then €3k a year for 30 years to avail of the Small Gifts Exemption.
Then maybe Business Relief on a business worth €2m.
And with a Threshold of €335k ...
They pay no tax at all on their gifts or inheritance.
Opinions differ, but that does not seem fair to me.
Brendan
Education has never been more accessible. When I left school in the late 80's only those with money could go to college. Since then I have secured a degree, masters and a professional qualification accountant (all part time).We have huge inequality in society.
And a lot of that inequality is inherited.
I would prefer to see people rewarded for their work than for their accidents of birth.
Brendan
| €3k from each parent from age 1 until parents deaths 60 years later | €360,000 |
| €3k from each parent to child's spouse from age 25 until parents death 35 years later | €210,000 |
| €3k from each parent to child's two children, born when child was 30 until parent death 30 years later | €360,000 |
| First parent dies and leaves €335k to child, €16250 to child's spouse and €32500 to each grandchild | €416,250 |
| Second parent dies and leaves remainder to child, €335k of which will be tax free, €16250 to spouse and €32500 to each grandchild | €416,250 |
| Total tax free transfer | €1,762,500 |
| Second parent dies and leaves remainder to child, €335k of which will be tax free, €16250 to spouse and €32500 to each grandchild | €416,250 |
| Total tax free transfer | €416,250 |
By effectively removing this exemption you want to give more tax to Revenue. Removal of these type of incentives act to discourage people trying to better themselves.
Why better yourself to work hard, do without to help your family etc.
A counter point to that could be that you are rewarded for your work when you work. You trade your time & expertise for wages & you're tax'd on those wages.We have huge inequality in society.
And a lot of that inequality is inherited.
I would prefer to see people rewarded for their work than for their accidents of birth.
Brendan
But to me the example above is very unfair to the second family who will end up paying inheritance tax on anything over €416k just because they weren't wealthy enough in their lifetimes to hand it over sooner.
This is an important point. I think most people make a distinction between inequality that derives from work/enterprise; inequality that derives from inheritance; and inequality that derives from non-economic factors like poor decision making.Why better yourself to work hard, do without to help your family etc. Remember this exemption when used is used by the ordinary person.
In my humble opinion the $335k is a combined figure for both parents. I am open to correction.Is the €335k Group A allowance from both parents combined, or can you receive €335k from each parent if they have the money to do it?
Thought it might be interesting to do the numbers on how things play out for average people vs. those who have the money to give to their children during their lifetime -
1. Wealthy parents able to give money during a single child's lifetime:
€3k from each parent from age 1 until parents deaths 60 years later €360,000 €3k from each parent to child's spouse from age 25 until parents death 35 years later €210,000 €3k from each parent to child's two children, born when child was 30 until parent death 30 years later €360,000 First parent dies and leaves €335k to child, €16250 to child's spouse and €32500 to each grandchild €416,250 Second parent dies and leaves remainder to child, €335k of which will be tax free, €16250 to spouse and €32500 to each grandchild €416,250 Total tax free transfer €1,762,500
2. Average people who build up a decent pension but cannot afford to transfer money to their child during their lifetime, no significant savings outside pension so first parent to die leaves everything to the second (as is common).
Second parent dies and leaves remainder to child, €335k of which will be tax free, €16250 to spouse and €32500 to each grandchild €416,250 Total tax free transfer €416,250
I wouldn't be in favour of chasing every penny transferred from a parent to a child, particularly things like paying for education and even weddings, or creating a huge admin overhead for small transfers. But to me the example above is very unfair to the second family who will end up paying inheritance tax on anything over €416k just because they weren't wealthy enough in their lifetimes to hand it over sooner.
The small gift exemption should count towards your CAT lifetime group thresholds in my opinion, even if those thresholds were increased so this all worked out revenue neutral to the exchequer.
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