Will we have to pay tax on a "gifted" deposit for our first property?

sb31

I am looking to buy a flat with my partner to live in and we are hoping to put a deposit down of £45,000 (25% of the purchase price). £10,000 of the deposit is coming from my side - the sale of my car, and a gift from my parents/grandparents. £10,000 is coming from my partner, with whom I will be living with in the new flat; and £25,000 will be coming from my partner's mum, of which she is donating £18,000 as a gift and the remaining £7000 we will pay back (when we are in a better financial position when my partner qualifies) with capital gains. We are first-time buyers. My partner is currently studying at uni for another four years and we were advised to apply for the mortgage in my name as he has no permanent income. We intend to be joint owners of the flat and will be signing a deed of trust to certify this.
Firstly if the "gift" (from parents) is going towards a deposit on a property do we have to pay tax, what percentage and what is the threshold? I aware that you can receive ~£3000/year before paying tax but does this apply if the money is going straight into the deposit on a house?
Secondly the money from my partner's savings will be for invested interest in the property on mine and his behalf so technically not a gift. What are the financial ramifications of this? Could this be resolved through the deed of trust?
Thirdly will we/my partner's mum be taxed for the £7000 she is giving us to "invest" in the property? We are more concerned with the immediate costs as am aware we will probably have to pay CGT in the future.
All the money we put aside for re-doing the house/our wedding is already being eaten up in solitor fees, mortgage fess and such like. Having to pay tax on top of the deposit which was intended by our parents to help us out, would be crippling.
Any advice would be gratefully received.

Thanks

x

theartfullodger

As I understand it (but I'm no tax or law expert...)

Should anyone giving you £££ die within 7 years of the gift (current legislation) then IHT may be payable on that gift if the estate of deceased person exceeds IHT limit when the die.. (Current legislation).

However, with the country in the mess it is in & that nice Mr Cameron trying to figure out ways of spending less & raking in more tax f*** knows if the rules might not get tighter between now and whenever...

Re anyone "investing" be careful.. I think you mean it will be a loan.. so as such should be declared to your mortgage lender who may then decide you no longer qualify for the deal... It has been suggested that the best way of handling this, were one wishing to be on the fiddle, would be for there to be no formal written agreement to repay the loan [interesting question of trust] and (eg) no regular setup standing order repayment thereof.., But clearly no-one on MSE would be thinking of fiddling so that necessity won''t arise..

Further, if "investment" then HMRC would expect to see joint names of all investors/mortgage holders on property... and I guess if they were really feeling tough (i.e. had some motivation having found other nefarious acts going on to raise their ire...) might decide to tax "investor" on the notional market-rate interest their loan should make...

Cheers!

Artful

geoffky

buy a house and then you might be able to payback what you owe...with a flat....too much risk...

00ec25

sb31 wrote: »

Firstly if the "gift" (from parents) is going towards a deposit on a property do we have to pay tax, what percentage and what is the threshold? I aware that you can receive ~£3000/year before paying tax but does this apply if the money is going straight into the deposit on a house?

there is no tax on gifts, period.
the implication is, as stated, if the person making the gift dies within 7 years of the date of the gift then their estate (not and never you) may be liable for IHT if their estate is more than the (then) IHT threshold - the "nil rate band"

sb31 wrote: »

Secondly the money from my partner's savings will be for invested interest in the property on mine and his behalf so technically not a gift. What are the financial ramifications of this? Could this be resolved through the deed of trust?

do you mean that becuase partner is putting down more deposit than you are then he should by rights own more of the property than you? This is quite normal and is dealt with by means of the type of ownership you both have, ie instead of being joint owners (ie 50/50) you will be "tenants in common" and will need to specify (in writing) your respective shares . ie he puts down a deposit which represents 10% of the purchase price you put down 5%, he will own 5% more of the propety than you do. Your solicitor will advise you what to do

sb31 wrote: »

Thirdly will we/my partner's mum be taxed for the £7000 she is giving us to "invest" in the property? We are more concerned with the immediate costs as am aware we will probably have to pay CGT in the future.

assuming this remains your "main residence", then you will never be liable for CGT
your mother in law however will be liable for Income Tax (not CGT) as she is not an owner of the asset, therefore cannot make a gain on its sale since she is not selling something she owns. Instead she will be laible for Income Tax in just the same way as if she had deposited £7k in a savings account and received her money back at some point in the future plus interest, She is laible for Income tax on the interest element.