Tax implications of paying my mums mortgage..

omy

Afternoon all,

Situation:

Since my mother stopped working (5 yrs ago), i set up a standing order to her account to pay her mortgage. Every year I pay a lump sum towards the reduction of the total outstanding mortgage (usually £10k).

Question:

As the property is my inheritance, are there any tax implications with this?

Any advice appreciated.

kingstreet

I can't think of any.

However, this inheritance may disappear if she needs long-term care. Her property will be sold, or at least a charge taken over it, to refund the council the cost of such care.

Once the mortgage is repaid, you can consider a family estate plan, a combination of will & trust to remove the property from her estate for care fee and inheritance tax purposes.

TrickyDicky101

I hope you've got this formally documented as a loan to your mother otherwise if she does go into care and needs to sell the house to pay for it, your entire inheritance (including what you've paid for yourself) could disappear in care fees.

Annisele

If you've got everything formally documented as an interest free loan, then I can't think of any.

If it's not a loan, then if you die before your mother and your estate is over the IHT threshold, there might be inheritance tax implications.

If it is a loan but there's interest, there are probably income tax implications.

getmore4less

Which taxes are you thinking about?

There is no tax on transfer of gift for either side.

The gifts are PETS from your your estate unless they fall into one of the exemptions, regular from income might come into play even for the 10k each year if this is from income(quite strict conditions apply).

Beware if there is a condition on the gifts that the house is your inheritence that could become a gift with reservations so the gifts may remains in your estate untill that condition is removed and then they become a PETs.
This can lead to a potential for double counting for your IHT if you die soon after your mum.

making them a loan does not help your estate IHT situation as effectifely the money never leaves your estate.

omy

Thank you all for your response.

The payments are all from my regular income earnings, including the lump sum. From what I have understood so far.... these are seen as gifts/loans as they are to my immediate family? (sorry - not too aware of the financial jargon).

Would it be easier to put my name on the mortgage alongside my mother? Therefore bypassing all the mortgage companies questions of 'where has the money come from'.

andrea_louise

omy wrote: »

Afternoon all,

Situation:

Since my mother stopped working (5 yrs ago), i set up a standing order to her account to pay her mortgage. Every year I pay a lump sum towards the reduction of the total outstanding mortgage (usually £10k).

Question:

As the property is my inheritance, are there any tax implications with this?

Any advice appreciated.

Hi Omy,

Just wondering (and nothing to do with tax implications) is your mum on means tested benefits? Either ESA or Pension Credit? If so, your £10k lump sum payment needs to be carefully managed, as this would/could preclude your mums entitlement.

ESA anything over £6k reduces your entitlement to benefit, and PC I believe is 10k.

As mentioned above, you need to get paperwork in place, to cover yourself. And if what I have mentioned does apply, you need to either make the op direct to your mums mortgage account, or split the payments up to maybe £2500 per quarter.