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£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

Comments

  • ColdIron
    ColdIron Posts: 9,781 Forumite
    Part of the Furniture 1,000 Posts Hung up my suit! Name Dropper
    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
  • 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
    Paul
  • le_loup
    le_loup Posts: 4,047 Forumite
    If the parents ever need State help, watch out for "deprivation of assets".
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    pmartin86 wrote: »
    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.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    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.
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