Lending money to family members

taclm

I am planning on capital raising on my home a sum of money to lend to a family member. This is purely a way of helping them to raise some money and there will be no financial gain in it for me. I will pay interest to the lender and she will pay me interest of exactly the same amount. The Inland Revenue have told me that the interest received by me is chargeable to tax but it could depend on how any agreement is worded. Could any one enlighten me as the taxman said on the phone it was not his place to give advice.

SeniorSam

taclm wrote: »

I am planning on capital raising on my home a sum of money to lend to a family member. This is purely a way of helping them to raise some money and there will be no financial gain in it for me. I will pay interest to the lender and she will pay me interest of exactly the same amount. The Inland Revenue have told me that the interest received by me is chargeable to tax but it could depend on how any agreement is worded. Could any one enlighten me as the taxman said on the phone it was not his place to give advice.

A REPLY ..... No doubt he was trying to be helpful in letting you know the FACTS that any income can be subject to income tax.

If as you say you are not going to receive any benefit, then why have interest charged and any wording you may feel would avoid that is not legal.

One thing I might suggest to you if you cannot afford to lose the loaned amount completely in the event of your relative defaulting or becoming insolvent/bancrupt, is get the loan secured against the relatives property by way of a legal charge to protect that money. A solicitor would be able to draw this up for you.

There are thousands of stories of loans to friends and family that have been completly lost, so don't take that chance.

Hope this helps

Sam