Rules regarding parents giving money for the deposit

sandford6016

Hi,

My parents are giving me £20k to fund the 10% deposit on our new house. What are the rules regarding this? Do we have to pay any taxes on it? We would really rather not!

Many thanks.

opinions4u

If the live for a further 7 years there will be no further tax to pay.

If they die within 7 years, there is a possible inheritance tax liability (although depepnding on the value of their estate this could be zero).

I'd suggest you google "HMRC Inheritance Tax" for full details.

Jonesy_McJones

I *think* they would be able to give you a tax free 'gift' of around £3k each per year and would be allowed to do that for the current year and the last. Anything over that could be subject to inheritance tax as already mentioned.

Don't take my word for it though as I can't remember the exact details...


Edited to add: found this:

http://www.thisismoney.co.uk/tax/tips-and-guides/article.html?in_article_id=396128&in_page_id=53968&in_advicepage_id=103
Gifts that are exempt
Some cash gifts are exempt from tax regardless of the seven-year rule. They include: wedding gifts of up to £5,000 to each of your children; wedding gifts of £2,500 to each grandchild, and wedding gifts of £1,000 to anyone else; other gifts of up to £3,000 a year (plus any unused balance of £3,000 from the previous tax year); gifts of up to £250 each to any number of people each year; gifts to charities, the National Trust, national museums, the main political parties and most registered housing associations.

sandford6016

Thanks very much. My parents were able to confirm this today with their financial advisor. The 7 year rule is the correct way to go about it!

Cheers.

Mrs_Bumble

You will probably need a letter for the lender that it is a gift and they are not looking for financial gain out of the property.

sidefx

Mrs_Bumble wrote: »

You will probably need a letter for the lender that it is a gift and they are not looking for financial gain out of the property.

Why?


OP apart from the 7 year rule you will be fine. Lucky you having such generous parents

Mrs_Bumble

If the deposit is not funded by the clients themselves then this potentially affects the affordability and security of the property which is the lenders main concern. For instance if the deposit was a personal loan that needed repaying or that they expected to put a second charge against the property.

So if deposit funds are provided by parents, simple letter explaining that they don't expect any financial gain out of the property or loan type agreement should suffice.

sandford6016

sidefx wrote: »

Why?


OP apart from the 7 year rule you will be fine. Lucky you having such generous parents

They know that they wouldn't be getting grand children until we move, so I think that is an incentive for them! :T

sidefx

Mrs_Bumble wrote: »

If the deposit is not funded by the clients themselves then this potentially affects the affordability and security of the property which is the lenders main concern. For instance if the deposit was a personal loan that needed repaying or that they expected to put a second charge against the property.

So if deposit funds are provided by parents, simple letter explaining that they don't expect any financial gain out of the property or loan type agreement should suffice.

I see what you mean. Although they are not after financial gain and merely want to help their child. But to make it set in stone, yes a declaration by the parents would be a sensible way to go.