Inheritance Tax / Legal Employment By My Mother

[LDC134]

Hi, I'm not sure whether to post here or in jobs, but hope you can help. My mother is now old and frail and above all, lonely. As her only child I am well aware that I will inherit everything she owns and she has assets totalling £250-300K. She would like me to give up my job and for her to 'employ' me on the same salary £20K, to be her companion. I'm not sure whether this is feasible, specifically a) do I become self employed and do my own tax and NI? and b) how could this affect any inheritance tax? If she were to die within the next few years would I be liable to pay back the salary paid? I would also welcome any comments on any other issues regarding this that people could forsee. Thank you in advance for your assistance.

[aelmpvw]

estates under £325,000 are free of inheritance tax

[New Judge]

If she employed you as her companion and paid you a salary it is difficult to see how you could be self-employed (have a look at HMRC guidance on being self employed).

As a result she would be responsible for deducting your income tax and NI and making payments to HMRC. A lot of hassle for somebody who is old and frail.

[Peter Pedant]

IHT - no effect - as the estate is under the limit

Employment - this is not a scheme to diddle the tax man and sounds lawful. - and also you could successfully argue that it was an odd tax evasion system where you PAY tax whereas if you were caring for a mother free then there would be no tax......

someone has answered the question - is there a lot of hassle involved ? and presumably no more than any other employer. You never hear - I dont employ people because o lardy daah the paperwork is so burdensome

anyway you would be doing it , wouldnt you ? the paperwork and not her

you could always ring the tax office and ask them
however I think Plan A if you want to do it - is well within the law

( maxwell who I agree was a crook employed his children - Ghislaine and the other one - and no one said ya cant do that.

and Fillon - in l'affaire Penelope employed his wife - OK France and it looks as tho that has screwed his chances of the french presidency - you arent hthinking of standing are you ?)

[fiction-factory]

To build on your other answers, if she is a widow you may find she has also taken over her husband's IHT allowance so effectively has a £600000 allowance. So there would be no IHT tax to pay. Your income from employment would be taxable of course so maybe you would be better off not receiving an income- just expenses/ gifts which wouldn't be taxable

[Buenchico]

As other's have indicated, there's no IHT payable anyway. The basic threshold is £325,000. Where someone has inherited everything from their spouse, that person also inherits their IHT allowance, taking the threshold to £650,000.

If you were to work for your mother on a self-employed basis you'd need to be able to show that you weren't tied solely to that one job in order for HMRC to accept that you were self-employed.

If your mother was to employ you on a PAYE basis, your duties could include those of her bookkeeper, meaning that you'd be responsible (on her behalf) for ensuring that all of the PAYE paperwork was correctly submitted to HMRC. (If you're to receive £20k p.a. it would actually cost your mother rather more than that as she'd have to pay the employer's contributions in regard to National Insurance. She'd also have to offer you a workplace pension but you could decline that offer).

[Peter Pedant]

My late mother wanted to employ me
( as a way of transferring funds - I was doing stuff for her )

and we decided all it would do was raise a tax charge

( = create a need to pay tax when previously there wasnt one )

[Old_Geezer]

Couldn't you simply make yourself unemployed and hope that family will chip in to help you through these hard times, whilst you help the family out, since you'd then have the free time to do so ?

[fiction-factory]

Or give up work, take some pension lump sum (tax free) and some pension, in the knowledge you will have plenty of cash at a later date. But there is always the risk that the assets will be depleted through care home costs

[Gizmonster]

Because she's below the Inheritance Tax threshold, why can't she simply give you £20k a year as a gift (which she's obviously prepared to do), as there'd be no comeback regarding Inheritance Tax, thereby legally avoiding NI and tax payments??

I know you can only give away £3k per year free of IT, but the estate is worth less than £325k:

Copied from the gov.uk website:

//////////// People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death. ///////////

The only possible problem would be if she was to go into a home, she might be accused of depriving herself of assets ..... unless I'm missing something else??

[LDC134]

Thank you all for your assistance. Gizmonster, your idea sounds very logical and she would be happy to pay me this way - does anyone know any problems this could bring up? Would this affect my NI and should I pay tax on this money?

[meglet]

HM Revenue & Customs does not treat a gift of cash as income so you won't be charged income tax. Income tax will be deducted at source from any interest you earn on the lump sum