How legal is this?

anselld

I have 2.49% offset mortgage with First Direct.

Mum has about 10k savings where she wants reasonbly easy acces and she doesn't like online banking at all. Hence the best she can get now is about 2% gross, 1.2% net (shes a higher rate tax payer).

What if she put the money in my offset account. I transfer money to her when she needs it and "give" her 2.49% net interest, ie 4.15% gross.

I realise all the trust issues, etc and that isn't a problem. But is it legal? I suspect not :cool:

Robert_Sterling_3

The fact that it is £10,000 makes the sums easy.

If the £10,000 were off set it would knock £249 a year off the cost of your mortgage.

So using your figures that is better by £129 than the £120 she could get elsewhere.

There are a number of other considerations.

Your mothers age, Your mothers total income, Cash ISAs etc.

.............................................................................

Is it legal .... I think not

JoeCrystal

@anselld I can understand your mother's dislike of online banking. I don't like on-line banking either and I am twenty two!

The only thing I am unsure is that would it count as taxable income, and thus have to be report on tax return?

anselld

Robert_Sterling wrote: »

Is it legal .... I think not

I am sure you are right, but why not specifically?
She gifts me money, I save it, pay the appropriate takes (in this case none), I gift money back. What rules are broken?

anselld

Put it another way - she gives me an interest free loan to help out with my mortgage. I am very grateful so sometimes I give her presents :-)

HappyMJ

I had my house deposit offset against my mothers offset mortgage before I bought my house. I don't see why it's not legal. The bank even encouraged it.

tinkerbell84

I do the same with my FD offset mortgage.

I don't pay interest on the money that is 'sitting' in my accounts, but I 'treat' the depositor on a regular basis. (the illegal bit would be paying interest but not deducting/paying the taxman the tax on it)

With rates as low as they are now, i think I have more dosh heading my way :beer:

FD had no problem with it as long as the account was in my name only - and I told them exactly what I was doing. I have a seperate savings account for that person's money

EalingSaver

is your mother a taxpayer? If she isn't I'm not sure I can see what rules can possibly be broken.

But from the gifting angle - forget it. If you need to rely on 'gifting' to make it work then I u are almost certainly in all sorts of dodgy tax territory.

e.g.
Can your mother really afford to gift you that money? And if there is an expectation that you will be making some form of regular (or irregular) gift back then no chance: can't remember the tax terminology, but in essence it was never gifted because it wasn't unconditional.

But it is fundamentally legal for families or others to pool savings into an offset mortgage. I'm pretty sure I've seen banks even advertise that.

YorkshireBoy

EalingSaver wrote: »

But it is fundamentally legal for families or others to pool savings into an offset mortgage. I'm pretty sure I've seen banks even advertise that.

YBS offer such a facility, and they call it 'Offset Plus'.

It's different from FD's operation though because the savings are held in the gifting person's name, with the benefit passed to the mortgage holder.

anselld

EalingSaver wrote: »

is your mother a taxpayer?

Yes - higher rate.

EalingSaver wrote: »

But it is fundamentally legal for families or others to pool savings into an offset mortgage. I'm pretty sure I've seen banks even advertise that.

Yes, I found this from YBS ...
Offset plus is a great feature available on our offset accounts, which gives you a greater scope to benefit from linking savings to your mortgage. With our standard offset accounts you can offset your savings against your mortgage to save yourself money. Offset plus simply means that as well as your own savings, the savings of family and friends can also be linked to your mortgage - meaning that they can give you a helping hand when it's needed. They link their savings to your mortgage by opening an offset plus savings account.
Not sure if similar is available with FD, but it means it must at least be legal (provided you are not paying the family or friend interest)

anselld

YorkshireBoy wrote: »

YBS offer such a facility, and they call it 'Offset Plus'.

It's different from FD's operation though because the savings are held in the gifting person's name, with the benefit passed to the mortgage holder.

Thanks - sorry, posts crossed!