£10,000 "gift" from parents to child - Taxes?
pmartin86
Posts: 754 Forumite
Hi, Im posting on behalf of a friend.
He is looking to buy his first house soon and has saved up aproximatly £8,000 deposit, the house he wants is around the £100,000 mark and his parents ahve decided they want to help him out by giving him an early "inheritance" cheque for £10,000 to go towards his deposit. Basicly, they want to know exactly how this would work in terms of tax etc? does any apply? if so, is there a way to avoid it? Also, how would the banks look upon the "gift" in terms of offering a mortgague?
Regards
Paul
He is looking to buy his first house soon and has saved up aproximatly £8,000 deposit, the house he wants is around the £100,000 mark and his parents ahve decided they want to help him out by giving him an early "inheritance" cheque for £10,000 to go towards his deposit. Basicly, they want to know exactly how this would work in terms of tax etc? does any apply? if so, is there a way to avoid it? Also, how would the banks look upon the "gift" in terms of offering a mortgague?
Regards
Paul
0
Comments
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Generally parents can give money to their children without informing HMRC, there is no Gift Tax in the UK
However if they die within seven years the gift will be taken into account for Inheritance Tax
http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm
Once your friend receives the money it is theirs and should not concern the bank0 -
Excellent, thank you very much, I'm not sure, but I don't beleive his parents estate would come up to the £325k mark anyway. (House in same area as my on mum and probably around the £120-150k mark) and I know their not living a life of luxury, so unless they have a large stash hidden away somewhere I suspect he should be safe!
Regards
Paul0 -
If the parents ever need State help, watch out for "deprivation of assets".0
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Hi, Im posting on behalf of a friend.
He is looking to buy his first house soon and has saved up aproximatly £8,000 deposit, the house he wants is around the £100,000 mark and his parents ahve decided they want to help him out by giving him an early "inheritance" cheque for £10,000 to go towards his deposit. Basicly, they want to know exactly how this would work in terms of tax etc? does any apply? if so, is there a way to avoid it? Also, how would the banks look upon the "gift" in terms of offering a mortgague?
Regards
Paul
The parents should each gift him £5000, which uses up this tax year's £3k allowance exempt from IHT and £2k of last year's allowance. They should each write him a letter to that effect, and he and they should keep copies. Then even if they have a big win on the lottery or the premium bonds, those gifts are permanently free of IHT.Free the dunston one next time too.0 -
Oh, and the banks might ask for a letter from the parents to confirm that the money is a gift and not a loan.Free the dunston one next time too.0
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