Question on deposit help from relatives

peterwhite097

Hi All,

The question:

In-laws(pensioners) have offered a substantial contribution to the deposit, no repayment expected.

If they make this contribution by first transferring into my spouses bank account, they will attract tax, as they can only gift max. £3000 a year.

Is it correct that the right way would be to pay their part of the deposit directly to the solicitor when contracts are exchanged, so effectively buying (part of the) 'goods' themselves, and therefore any tax is being covered by the stamp duty on the purchase?

Many Thanks

G_M

No. It is still a 'gift' as it's buying a house which will belong to....you!

They can gift £3K each ie £6K.

They can do this each tax year. It's March now, so £6K now and another £6K next month. That's £12K.

If they have not used last financial year's allowance, they can both use this too. That's £18K

Even if they go over this amount, it only becomes taxable (inheritance tax) if they die within 7 years. See here.

timmyt

as a solicitor, that is also my understanding too

TrickyDicky

You can gift as much money as you want to anyone you like tax free (assuming they've already paid income tax on it!). The £3k limit is for inheritance tax purposes, if you die within 7 years of the gift being given (after 7 years, no IHT is liable)

If they gave you £15k in one year, and died within 7 years, you would have to pay inheritance tax on £12,000, if their entire estate went over the threashold.

peterwhite097

Thanks All.

Trollfever

TrickyDicky wrote: »

You can gift as much money as you want to anyone you like tax free (assuming they've already paid income tax on it!). The £3k limit is for inheritance tax purposes, if you die within 7 years of the gift being given (after 7 years, no IHT is liable)

If they gave you £15k in one year, and died within 7 years, you would have to pay inheritance tax on £12,000, if their entire estate went over the threashold.

Bear in mind IHT taper relief.