Paying parents mortage - tax implications

jennifernil

Not at all.

We regularly give our children money, never any tax liability.

I don't understand this......

"just wanted to check as I have been stung before with tax when gifting money "

there is no tax on gifts in UK

kidmugsy

First decide whether you are gifting them money or giving them interest-free loans. Then document everything, e.g., write a letter saying, for example, "Dear Mum and Dad, I shall start paying £200 per month into ... which constitutes an interest-free loan from me to you, repayable when .....". Each year (say) they could write you a letter confirming that they received payments totalling (say) £2400 during 2014 and that they are grateful to have received these as an interest-free loan.

Then you and they keep copies on file in case there's ever an enquiry from the taxman, the mortgage company, or whomever. And that's that!

newbie2013

Thankyou all for your suggestions and help.

When wrote
"just wanted to check as I have been stung before with tax when gifting money "
I had been taxed on other things before, when I misunderstood the tax rules, such as paying part of the mortgage - as it was classed as paying that off, when they sold the property, they were taxed on the money they received from me.

It was a complicated and long winded affair.

holly_hobby

Setting aside effecting this under a loan arrangement.

All gifts made under UK tax regs are tax free, and if you choose to make their mortgage payments for them, as a gift it remains from their taxation position, completely tax free.

From your side of things (although it will be your beneficiaries that feel the impact), things will be more complicated if your net estate on death, exceeds your available nil rate IHT threshold (currently 325k per person), and any payments to parents were made within the proceeding 7 yrs (subject to annual gift exemption limits, which are currently 3k, and possible unaffected income exemptions).

If that will/or is likely to be the case, guidance can be given on how to manage this (which I won't complicate this response with) - but to answer the simple question - NO there is no gift tax liability for Mum and Dad in respect of monies recd from you.

Hope this helps

H x

getmore4less

regular gifts from income are also tax free.

where the numbers involved fall within regular cash flow it is easy to hide a few 10k over a couple of years and hmrc will not be bothered.

holly_hobby

Yep ..... if standard of living is unaffected by donations from normal income, (which must be classed as regular expenditure to be exempt)

holly_hobby wrote: »

... (subject to annual gift exemption limits, which are currently 3k, and possible unaffected income exemptions).

H x

Ref - http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm14231.htm - for further guidance

Hope this helps

Holly

newbie2013

Thankyou all for your advice - it is really a minefield out there, and trying to keep in line with HMRC rules etc can be tricky for those new to it!

holly_hobby

Yep ...

If you think/anticipate that your parents net estate on 2nd death (upto 650k net on current regs), or your own will exceed your nil rate IHT band (inc any non-exempt gifts/PETs), and may be exposed to IHT liability, then before you implement this arrangement, please engage and take advice from your own tax practitioner. Whom having personally examined the financial situ of both parties, will advise the best way to implement, manage and record this arrangement.

Forum advice is free and can help get the ball rolling, but should always be independently verified with an acting practioner.

Hope this helps

Holly x