First time Buyer and being gifted money

harvey1964

I am in the process of buying (hopefully) my first house and my parents are helping me with a deposit...They were thinking of helping me pay my mortgage for the first year., as in so much each month - not all in one go. they are allowed to gift a maximum of £3000 with out paying tax...Is that each or just between them ?they both work and pay tax.
Also if they do this can they also give me money for the deposit....
Hope this is the right place to post...if not please advise
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm
I dont fully understand the above info , but i did read it......maybe someone can advise me

scottishblondie

Each person has an individual allowance of £3k per year which they can gift without inheritance tax implications, so between them they could give you £6k. If they did not gift more than £3k each in the previous tax year, that allowance can roll over, so it could be up to £12k. Of course this is all beside the point if they live for more than 7 years after the gift is made, as then IHT would not apply.

They can also give gifts out of income on top of this but these must come from income, not savings, and must not reduce their ability to support themselves or cause them to have to use their savings to support themselves. So if their monthly income is say 2k, and their normal expenditure only amounts to 1k they can gift you further money out of that surplus 1k.

harvey1964

I read this and thought that was possible. I was going to get £6000 off them for a deposit and then they were going to give me £250 each a month from their income ( they wanted to give me more off a deposit but have been overspending on their own house this year ) That is why they are going to fund my account to the tune of a very generous £500 per month ...of which i am eternally grateful.
Have been googling all day and this sort of sums up what you have said.......
http://www.timesonline.co.uk/tol/money/reader_guides/article3971312.ece

BitterAndTwisted

Have you looked into how mortgage-lenders view gifted deposits?

tyler80

Gifted deposits in a mortgage sense refer to deposits gifted by the vendor/house builder (a fiddle on the property price really). If parents give children money towards a deposit that is not a 'gifted deposit'

harvey1964

tyler80 wrote: »

Gifted deposits in a mortgage sense refer to deposits gifted by the vendor/house builder (a fiddle on the property price really). If parents give children money towards a deposit that is not a 'gifted deposit'

so are you saying they are able to give me this money without any implications..They have both worked all their lives and are now mortgage free and want to help me out with money now when i need it most

Mexas

The best explanation I've found is this:

http://www.simplyfinance.co.uk/answer/how-much-money-can-be-gifted-before-there-is-a-tax-on-it

You can gift any amount of money, without any tax being due on the gift. However, if you die within 7 years then the amount you have given away (in total, within that seven years) will be counted back into your estate for inheritance tax calculation purposes.

Take care about capital gains tax, though. If you are giving away an asset (such as shares or funds, or a property, for example) then you (not the recipient) might have to pay capital gains tax. The gift will fall into the CGT regime if it is worth more than when you obtained it, whether as a gift or legacy yourself, or whether purchased. This year (2010/2011) the exemption is £10,100, and you would normally be liable for tax at 18% on any total overall gain of more than that figure. Even if you give a property or other assets away, it is regarded, for the purposes of CGT calculation, as having been sold at normal market value.

Hope it helps.

harvey1964

No they havnt sold any house they have just paid off their mortgage early and are still living in family home.
that is excellent . thank you
happy days !!!

nearlyrich

I have just given my DD a contribution towards her first home, the mortgage company and the solicitor both asked for a letter confirming it was a gift and the building society wanted a letter from me stating it was a gift and that I would not have a claim against the property.

Yorkie1

All the advice is good but just make sure you don't confuse IHT with a lender's position.

I received a gift from my parents towards my deposit, see nearlyrich's post for what was required from the lender / solicitor.

If my parents die within 7 years then the money will be treated as if it was still in their possession (i.e. estate) when the IHT position is calculated - subject to a gradual tapering off over time. And the annual exemption will also reduce the amount which will be treated as if it was still in their possession.

The lender is not bothered about IHT. Its only concern is that you can afford the mortgage and deposit, and that the house represents good security for its loan to you.