Loan from Parents

martonsadler

Hi,
My parents are goin to lend me money (from their savings) to pay off my mortgage. Will I be liable to tax in any form please?
Hoping someone can help.

mrposhman

How much are you borrowing?

I assume they won't be on the title deeds?

martonsadler

Thanks for your reply.
About £50k. Are there limits?
No they won't be!

mrposhman

I don't know a great deal about it but I think there is an amount that can be passed as a tax free gift every year from parents etc but i'm not that sure on the amounts involved

katyw

Hi. If they are gifting you the money, there is no income tax due on the gift, but there could be inheritance tax due......your parents can give you £3,000 a year each free of IHT, plus the previous years exemption. So that would be £12,000 tax free. If they were to die within 7 years the remainder of the gift would be chargeable to IHT within their estate. Of course, if they survive 7 years, it falls out of their estate and isn't chargeable.

However, if it is a loan and you pay them back with interest, this interest is liable to income tax on your parents. (They would have paid tax on the interest they earned in savings though)

Hope this helps.