Tax on cash gifts

octon

I wish to give each of my children £50,000 towards purchasing their houses. Will this sum be considered as income for them, and as such subject to income tax? I realise they may have to pay IHT should I die within 7 years.

antrobus

octon wrote: »

I wish to give each of my children £50,000 towards purchasing their houses. Will this sum be considered as income for them, and as such subject to income tax?

No.

(... but apparently that answer is to short, so here's some filler)

octon

Doesn't look too short to me but exactly to the point. Thank you!

octon

As a follow up to this, would I need any legal documentation to specify that the sum is a gift and not a loan?

CLAPTON

there is no tax on cash gifts
there is no tax on loans unless you charged them interest in which case you would be charged tax on the interest
a mortgage lender would probably ask the origin of their deposit and might require a letter from you saying it was a gift and that you had no financial interest in the house
and as far as IHT is concerned, depending upon how you have written your will all the IHT would be paid from the estate and not from your offspring's 50k

antrobus

octon wrote: »

As a follow up to this, would I need any legal documentation to specify that the sum is a gift and not a loan?

Well I'm not so sure that you need any legal documentation as such; people give money to their children all the time without jumping through any hoops. But it has been known (i.e. I've seen some threads here on MSE) for parents to change their minds at a later date, say the gift was a loan, and ask for it back. So it might be in your children's interests to have confirmation that it is a gift. And sometimes, since the money is for house purchase, it has been known for other parties to get a bit excited if they discover that the deposit for the property has been gifted to ask for documentation.

kidmugsy

I suggest you write each of them a letter and keep a copy on file for yourself. That would be a very cheap way of documenting the action in case ever questions arise about it from any party. (Anyway, that's what we do.)