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Shared Ownership/Gifting Money

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Matt95Davies
Matt95Davies Posts: 3 Newbie
in House buying, renting & selling
I am looking at a shared ownership property but would like to buy a two bed apartment that I can not afford on my own, but fortunately my parents could gift me money to pay a large enough deposit that I can then afford it. I believe that they can do this tax free as long as they live for 7+ years.

I then run in to some issues however:
    If in the future I want to sell the property or buy them our of their deposit, is there a way that I can do this, i.e. can I gift money back to them in the same way?
    As it is a two bedroom apartment I would be renting out the other room and receiving income from it. This would be fine as I believe that I can earn up to £7,500 from a lodger without having to pay tax on it. I do not know however the implications on my parents if they were to receive a proportion of rental income from the lodger as well, as technically they would be receiving rental income on a property that they have no interest in.

Would anyone please be able to advise me as to whether I would be able to gift a lump sum in return to my parents and what they could do in regards of receiving rental income on a property that they don't own.

Regards

Comments

  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    If your parents are gifting you the money why would there be a need to buy them out at a later date or share the rental income with them?

    There is no gift tax in the UK so you are free to make cash gifts to whomever you like.
  • Mojisola
    Mojisola Posts: 35,557 Forumite
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    Matt95Davies wrote: »
    I believe that they can do this tax free as long as they live for 7+ years.

    This only applies if their estates are going to be liable for inheritance tax.

    Otherwise, as Pixie says, there's no tax on gifts.
  • xylophone
    xylophone Posts: 44,427 Forumite
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    Your parents are making you an outright gift to enable you to buy a property.

    They would have no legal or beneficial interest in the property.
  • Matt95Davies
    Matt95Davies Posts: 3 Newbie
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    Maybe I didn't specify clearly enough, they are looking to see if they could gift me the money but treat it almost as an informal loan, or an investment. They would want a return in the form of rent and any capital gains if I decided to sell the property in the future, or for me to buy them out (gift their money back) if I could afford it.
  • davidmcn
    davidmcn Posts: 23,596 Forumite
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    Matt95Davies wrote: »
    they are looking to see if they could gift me the money but treat it almost as an informal loan, or an investment. They would want a return in the form of rent and any capital gains if I decided to sell the property in the future, or for me to buy them out (gift their money back) if I could afford it.
    Then it's not a gift.
  • Matt95Davies
    Matt95Davies Posts: 3 Newbie
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    But it isn't a formal loan. I am trying to figure out if there is a way that I can gift them and money back, (a lump sum in a few years, and rental income consistently, on a property that they don't officially have a legal interest in.
  • aneary
    aneary Posts: 921 Forumite
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    When I was buying my parents were kind enough to offer to lend me some money, they didn't require it back but I wanted to give it back, therefore I planned on remortgaging my flat in a few years time and pay them back that way. However this wasn't a Help to buy flat.

    Also if the house prices fell I wouldn't have been able to remortgage and pay them back but as it was a gift and my parents had the money to give that wouldn't have been an issue for anyone but my sense of paying them back.

    If your parents can't give you the money without you paying them back (however informal) you probably won't be able to borrow the money, have help to buy and a mortgage.
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    You and your parents can call it what you like but it is not a gift it is a loan no matter how informal the repayment terms. If you require a mortgage then you can forget about it because I don’t think any lender offering SO mortgages will accept a borrowed deposit.
  • gingercordial
    gingercordial Posts: 1,681 Forumite
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    If you need a mortgage your parents will be required to sign a legal document stating that it is a real gift, ie no strings attached, no repayment, no "investment", no return from the property.

    If they do not sign this you will not get a mortgage using that money. You need to find the money elsewhere.

    If they do sign it whilst you all agree in the background it is really some kind of loan then you are committing mortgage fraud.

    Or they could just give you a real gift and not expect anything back from it.
  • xoAmyox
    xoAmyox Posts: 553 Forumite
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    If this is a shared ownership property, and you can't afford the deposit (v.low) - then can you really afford to buy at all?

    Do you have savings or contingency in the event that the boiler went, or for general maintenance and upkeep of the property?

    Think very seriously about the commitment of a mortgage (especially if you are reliant on lodger income - what if they don't pay, or the room doesn't rent out??)
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