Help From Parents

FraserGreen

Hi,

I have been reading a lot about Inheritance Tax and don't fully understand it. My partner and I are buying a house next March and require money from both parents (my side and my partners side) to help with the mortgage.

How much can they legally give us without incurring additional charges? Am I right in saying if its more than £3,000...40% tax will be required?

MercilessKiller

FraserGreen wrote: »

Hi,

I have been reading a lot about Inheritance Tax and don't fully understand it. My partner and I are buying a house next March and require money from both parents (my side and my partners side) to help with the mortgage.

How much can they legally give us without incurring additional charges? Am I right in saying if its more than £3,000...40% tax will be required?

I'm in the same position as you in terms of using money from parents to help with the mortgage.

Firstly, you don't have to worry about inheritance tax as that's simply to do with post-death, thus the money they give you isn't exempt from inheritance tax for about 7 years. Here's a good article on it:
http://www.thisismoney.co.uk/money/experts/article-2590889/Will-I-pay-tax-I-children-10-000-university.html

There is a great quote in that article which directly says they can gift you more than the £3k and that allowance shouldn't be confused with the level of tax paid.

However, I'm looking into the Family Building Society (google it) - You can use a 5% deposit and your parents can basically act as a guarantor (or even put their savings into a dedicated account). This is going to be the best option for me personally! I believe this is a new scheme.

FraserGreen

MercilessKiller wrote: »

I'm in the same position as you in terms of using money from parents to help with the mortgage.

Firstly, you don't have to worry about inheritance tax as that's simply to do with post-death, thus the money they give you isn't exempt from inheritance tax for about 7 years. Here's a good article on it:


There is a great quote in that article which directly says they can gift you more than the £3k and that allowance shouldn't be confused with the level of tax paid.

However, I'm looking into the Family Building Society (google it) - You can use a 5% deposit and your parents can basically act as a guarantor (or even put their savings into a dedicated account). This is going to be the best option for me personally! I believe this is a new scheme.

Thanks for the great, quick reply! Exactly what I needed to know :-)

xylophone

See http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

agrinnall

Are they giving you the money or lending it to you? If it's the former, you'll need to be able to prove where the money came from; the latter means that your mortgage borrowing limit will be reduced by the amount that the parents lend.

FraserGreen

agrinnall wrote: »

Are they giving you the money or lending it to you? If it's the former, you'll need to be able to prove where the money came from; the latter means that your mortgage borrowing limit will be reduced by the amount that the parents lend.

It'll be a gift and wont need repaid, so all that is needed is a letter from them stating where the money came from and how much they'll be giving us?

martindow

FraserGreen wrote: »

It'll be a gift and wont need repaid, so all that is needed is a letter from them stating where the money came from and how much they'll be giving us?

I've just given a gift to one of my children to help them with a deposit. The wording of the letter I wrote and signed was provided by their lender. No one asked how I had acquired the money.

FraserGreen

martindow wrote: »

I've just given a gift to one of my children to help them with a deposit. The wording of the letter I wrote and signed was provided by their lender. No one asked how I had acquired the money.

Great, thanks Martin.

seven-day-weekend

We gifted our son the money for his deposit. All we had to do (iirc) is tell the solicitor that it WAS a gift, and didn't have to be repaid. We also had to make sure that before exchange it was in our son's bank account and not ours.

Mrs_pbradley936

We gave our son and his wife a deposit for a house as a wedding present. I think you can give more as a wedding gift, but don't rely on my info because this was in 1996 and it might have all changed.

Worry_Wart

My dad gave me £10k a few months ago to help buy my house. The lender (Skipton) have a standard format letter he had to sign stating it was a gift and he had no interest in the property. Then he had to go to a solicitor in his home country and provide evidence he is who he says he is (passport, etc), which the solicitor then sent to my solicitor. On reflection, it would have been far easier if I'd just cashed his cheque a few months before applying for a mortgage, pretending I'd earned it myself, and no one would have been any the wiser, and it would have saved a lot of faff (especially as he was trying to hide this gift from his wife, incase she didn't approve). But it all worked out okay in the end.