Loaning my son money

Money_mad_4

If its a loan and you earn interest, it counts as income, you would have to declare it on your tax return. Dependant on how much you earn will depand whether you ppay at Base Rate or high rate 40% just on the interest not the 40k

MartynL

Money_mad wrote: »

If its a loan and you earn interest, it counts as income, you would have to declare it on your tax return. Dependant on how much you earn will depand whether you ppay at Base Rate or high rate 40% just on the interest not the 40k

I am earning no interest. It is a loan of an over payment on my mortgage. I give that to my son so he gets money to pay for his property cash. The money is from my property. He pays for the loan on my property either direct or indirect through me. Sorry if I sound a bit thick, it's because I am.

AMILLIONDOLLARS

MartynL wrote: »

Well I am getting completely lost and confused. :undecided

Firstly I think he earns more than £15,000 pa. Secondly the other thing about borrowing as per my first post is that it would only be over 15 years as I am 59 now. I know part ownership would be good for me but i would rather not be involved in the property, it's for them. Btw they are married 4 years now.

Pincher I don't want to gift the money, it is a loan. I probably will need it later in life.

You seemed to have forgotten that you are borrowing back the overpayments you have made, so you will need it!

AMD

Money_mad_4

If your son pays your interest its still your income but if you dont work thats fine cos you wont be over the threashold for tax, presumably

MartynL

Money_mad wrote: »

If your son pays your interest its still your income but if you dont work thats fine cos you wont be over the threashold for tax, presumably

I will be working. It is a minefield isn't it.

Money_mad_4

Depends how much you earn. My advice ring HMRC, they are on side and helpful honest

MartynL

I took voluntary redundancy and a pension but I will work, probably around £15k a year, well under half of what I was earning but it will do.

jamesd

MartynL wrote: »

I am earning no interest.

You are borrowing money from your mortgage lender which is charging you interest. You are lending the money to your son and charging him interest. The interest you are charging him is taxable. The after tax proceeds will be used by you to pay the mortgage company their interest.

If the mortgage company was lending him the money directly, him as borrower not you, then he'd be paying interest to them and that would not be taxable income for you. But this isn't what's happening.

Adding 25% to the interest rate to cover basic rate tax you might pay on the interest may still be a good deal for him. Harder to be a good deal at higher rate but still can be.

He can probably get a mortgage anyway. Even if not you can do a short term loan until he can get a mortgage instead of this long term one. You could also lend enough to get him into a nice loan to value range for a mortgage in his own name.

MartynL

jamesd wrote: »

You are borrowing money from your mortgage lender which is charging you interest. You are lending the money to your son and charging him interest. The interest you are charging him is taxable. The after tax proceeds will be used by you to pay the mortgage company their interest.

That's the bit I don't understand, I'm not charging him any interest he is just going to pay the loan direct or to me(same amount) and me to them. I am earning nothing in interest from him, just helping him.

dimbo61

Just to confuse things even more have you looked at the Yorkshire Building Society friends and family offset mortgages.
Now your son takes out a mortgage with them and you put money into an offset account in YOUR name but linked to his mortgage.
You earn no interest but he saves interest on the money you have offsetting his mortgage.
If you need some or all of the money you go down to the branch with your card and take out your money from your account.
If your son and partner break up then the money is in your account and nothing to do with any split.
The taxman is not interested because you get no interest
Your son and his wife will make the normal mortgage payment each month but much more of it will go to repaying the capital and not interest.
Please consider