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10,000 "gift" from parents to child - Taxes?
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# 1
pmartin86
Old 14-11-2012, 8:58 AM
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Default 10,000 "gift" from parents to child - Taxes?

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
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# 2
ColdIron
Old 14-11-2012, 9:11 AM
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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 bank
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# 3
pmartin86
Old 14-11-2012, 9:16 AM
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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!

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Paul
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# 4
le loup
Old 14-11-2012, 9:29 AM
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If the parents ever need State help, watch out for "deprivation of assets".
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# 5
kidmugsy
Old 14-11-2012, 11:21 AM
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Quote:
Originally Posted by pmartin86 View Post
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.
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# 6
kidmugsy
Old 14-11-2012, 11:28 AM
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Oh, and the banks might ask for a letter from the parents to confirm that the money is a gift and not a loan.
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