Parents paying for deposit for house - NOT A GIFT

tadeora

Option 1: My parents have agreed to pay the deposit of a new house. They are not giving me the money but paying for it from their own joint bank account.

Is this possible or is this classified as a gift (which therefore means potential IHT)?

My plan is to get a mortgage with my partner to buy (and own) the new house. My parents will continue to live in their existing house.

Option 2: The alternative option is to join (add my name) to their joint account and pay for the deposit from there.

Is that possible without it being classified as a gift as it looks like the money is coming from myself?

greenface

I cannot get m head around what your asking and why a gift or IHT would be a thought to your parents helping you with a deposit. more info please

and welcome to mse

CLAPTON

option 1

why can't they give you the deposit?
lots of parents do that if they can afford it


option 2
makes no sense whatsoever

DVardysShadow

Expect controversy from some mortgage advisors over this, which is why you make up your own mind and don't take advice.

If the money is given to you and it sits in your account, then the answer to what is the source of your deposit is 'own funds'. If it sits in your parents' bank account until they transfer it, the answer is 'gift'. If your name is added to their joint account, then the answer is a little more grey and I would say 'gift', because your solicitor could see the source was not your account and you would have a hard job saying it was 'own resources'.

Emmzi

I can't see any way this isn't a gift as they recieve nothing in return for the money (acid test). You are simply proposing ways to hide the gift and in the event of death if the estate is large then the taxman will be calling the accounts in for a look anyway.

Get the gift from the healthier of the 2 ie most likely to live 7 years?

DVardysShadow

Emmzi wrote: »

I can't see any way this isn't a gift as they recieve nothing in return for the money (acid test).

Q Are those socks yours?

A [Choose 1]

• They are a gift
• They are mine

Either answer can be true. You can say they are yours if no one else has a claim on them. If someone gives something to you, that enables you to say truthfully that it is yours.

Premier_2

DVardysShadow wrote: »

Q Are those socks yours?

A [Choose 1]

• They are a gift
• They are mine

Either answer can be true. You can say they are yours if no one else has a claim on them. If someone gives something to you, that enables you to say truthfully that it is yours.

But the real question is:

Q: Where did you get the money to buy those socks


A: [Choose 1]

• I saved it from my earnings
• Mummy and/or daddy gave it me

TrickyDicky101

Is your parents' estate should the worst happen and they die likely to exceed twice the nil rate band (£325k currently I believe)?

Emmzi

DVardysShadow wrote: »

Q Are those socks yours?

A [Choose 1]

• They are a gift
• They are mine

Either answer can be true. You can say they are yours if no one else has a claim on them. If someone gives something to you, that enables you to say truthfully that it is yours.

Which wiuld be fine for a question relating to gifted deposits.

I'm less certain of it for tax evasion. Possibley this query fits better on the tax board?

KateLiana27

Check the threshold for gifts to children. And yes, it would be counted as a gift whichever way you do it, unless your parents part-own the house (and then you'd be subject to inheritance tax on that if they died).

As far as I recall, parents are permitted to give up to £15 000 each year to a child, or £35 000 the year of their marriage (not transferable to other years if not given then). Only money that exceeds this would be subject to inheritance tax (assuming the estate as a whole meets the threshold). If one dies, the estate passes to the spouse without being subject to inheritance tax, so they would BOTH have to die within 7 years for you to have to pay out.

So:

- how much money are your parents giving you? Anything less than £15K is safe (or whatever the figure is now - check with HMRC)

- are both likely to die within 7 years?

If it's a much larger sum and both are in poor health, it's probably worth your while paying for an accountant to talk you through the options.

CLAPTON

KateLiana27 wrote: »

Check the threshold for gifts to children. And yes, it would be counted as a gift whichever way you do it, unless your parents part-own the house (and then you'd be subject to inheritance tax on that if they died).

As far as I recall, parents are permitted to give up to £15 000 each year to a child, or £35 000 the year of their marriage (not transferable to other years if not given then). Only money that exceeds this would be subject to inheritance tax (assuming the estate as a whole meets the threshold). If one dies, the estate passes to the spouse without being subject to inheritance tax, so they would BOTH have to die within 7 years for you to have to pay out.

So:

- how much money are your parents giving you? Anything less than £15K is safe (or whatever the figure is now - check with HMRC)

- are both likely to die within 7 years?

If it's a much larger sum and both are in poor health, it's probably worth your while paying for an accountant to talk you through the options.

inheritance tax is probably a total red herring in this situation

but for the record the exempt gift amount is 3k per person per year and unused allowance frorm the previous year can be used....

for weddings parents can give up to 5,000 each