Borrowing Money from Parents - Tax/Legal Implications

DopeyDylan

Hi All!

I'm a newbie moneysaver, so please be gentle! I'm not sure if this is the ideal forum for this question, but it made sense as I went thru the possibles!

My parents have kindly offered to lend me some money to help me towards my goal of paying off my mortgage within the next few years. They had an endowment from many years ago which they believe should pay out around £15k. They have suggested lending me this money to enable me to reduce my mortgage interest payments following a reasonably long spell of unemployment (note: I am back in employment now!). The idea would be to pay them back the money with a bit of interest on top in a few years when they approach retirement.

My questions are:
1) Are there any tax/legal implications of doing this?
2) If so, are there any ways that we could do something similar?
3) Any advice you can give in the area?

Thanks in advance... :beer:
Dylan

Northernbird_2

I'll be honest - I'm not a tax expert, but I think that as it's a loan and not a gift it should be ok, as you're repaying the money. Though (and don't take offence I don't mean to upset you), if they died before you had paid them anything and it was within 7 years, the amount might form part of their estate and be subject to inheritance tax.

If interest is being charged, your parents may have to declare the interest as income, just as if they had put the money into a savings account and earned interest.

It may be prudent to ring the tax office, but that's your call!

DopeyDylan

Thanks for the advice NorthernBird... I'll continue to ask a few questions I reckon!

I so wanna crush my mortgage!