Helping daughter with deposit

totallyblessed

Hi,

What (if any) are the tax implications of helping my daughter with her deposit for her first home. Who needs to know that we've lent/given her the money.

We'd like to give her £10,000 towards the deposit (it's not doing anything for us - she might as well benefit from it).

McKneff

Hello and welcome to the boards.

Cant see any tax implications at all if its a gift, good on you, I feel the same way. We have given our son and daughter £10k each over the last 2 years for the same reason.

The mortgage people (hers) may need proof that you have given her this money, but that's to do with money laundering, I believe.

I'm not likely to need a care home, dont claim any benefits apart from state pension.

Just go for it............

hjd

Nobody "needs" to know at this stage.
It does depend on the facts though.
For inheritance tax purposes, you can give a gift of up to £3,000 to any one person in a tax year - your "annual exemption". This can be carried forward for one year, so if you haven't already done so you could now give your daughter £6,000 to cover 2 tax years. Your husband/partner could also do the same, which totals £12,000.
May be best to write a short letter documenting what you are doing in case clarification is needed later.

The problem could occur if you have to go into a nursing home/care in the future. Google "intentional deprivation of assets" to see about that.

phill99

Providing its under £10600, which is the CGT limit for the year there shouldn't be a problem. But you may want to check with HMRC.

totallyblessed

Thank you for the replies. So giving away money only comes into consideration when inheritance tax is an issue? I was worried it was all the time - like when you give the kids money, just because you want to.

Peace of mind, thanks.

Hoof_Hearted

It is annoying that you can't give the money you have earned and paid tax on to anybody you like. We gave son £10K towards his first house and will do the same for our daughter. I will do my best to stay alive for seven years and then there is no problem.

totallyblessed

oh, just a thought, would she need to declare it as income?

hjd

CGT is not relevant.
It's not income for your daughter so no need for her to declare anything.
You can give whatever cash you want to anyone but the implications will be for inheritance tax.
If your estate is likely to be under the inheritance tax threshold then it doesn't matter what you give away and when. If it may be over the limit you should keep records of what you give away and when, as there could be inheritance tax due if you die within seven years of making the gift.

seven-day-weekend

We too have given our son the money for a deposit towards his first home.

As regards mortgage companies you have to gift it outright, not lend it.-

Lavendyr

phill99 wrote: »

Providing its under £10600, which is the CGT limit for the year there shouldn't be a problem. But you may want to check with HMRC.

Totally irrelevant - cash is not subject to CGT. Please ignore this post.

As others have pointed out, anything over the £3k per tax year (+ £3k brought forward if you gave nothing in the prior year) amount is treated as a potentially exempt transfer for IHT purposes. In other words, if you, individually, give your daughter £10k and then pop your clogs within seven years, it would be treated as part of your death estate and therefore could be liable to IHT - that is, if your death estate exceeds the threshold where IHT becomes due.

However, see the good post made by hjd above regarding who makes the gift.

See here for more details on IHT: http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm#4

As for informing people, when your daughter comes to buy a property, the solicitor (and therefore the mortgage company) will need to know that part of the deposit (if not all of it) comes from a gift. You may need to put something in writing to confirm that it is a gift free of obligation (as the lender won't usually want anyone but them to have an interest in the property).

Lavendyr

totallyblessed wrote: »

oh, just a thought, would she need to declare it as income?

Nope, as it's not income.