Loan from family member

hazelrichardson

Hi

My Mother in Law has just sold her house and paid off the mortgage that we had secured on it (£34,000) and has offered to let us pay it back with no interest added.

If we were to make regular monthly payments to her to cover this would she need to pay tax on this?

She is intending to consult a financial/tax advisor anyway but I just wanted to know what the different options were for paying back the loan.

I have around £10,000 that I could pay her straight away but assume this would be taxed if I gave her a lump sum towards it?

Can anyone help me decide which option might be best?

CLAPTON

if you pay her interest then the interest would in liable to tax on the interest although many family situations avoid this.

there is no tax if you are simply repaying the capital on the loan so there is no reason why you shouldn't repay her 10,000 in one go and / or make regular monthly payments.

hazelrichardson

Thanks for that. That's a big help. I was getting concerned that we might have landed her with tax to pay.