Taxation or not on Grandparents gift?

ER0108

Hi, please help.
My Grandparents live abroad & want to come back to the UK. If they gift me the deposit for a buy to let mortgage, then they live in the house I buy, will I have to pay tax? Would it be better if they gave it as a loan?

What is the best way to do this?

Any help would be much appreciated thanks.

ER0108

xylophone

Your grandparents should check on the tax situation in their country of residence - certain countries do have a gift tax.

In the UK, there is no tax on gifts as such, but there may be IHT considerations for the estate of the donor.

If you will require a mortgage, then you may have problems if the deposit is lent.

You may have problems with the mortgagee if you are letting the house to relatives.

All in all, you would be well advised to take expert advice before embarking on this course,

Pixie5740

As xylophone says, your grandparents will have to check with their country of residence about taxation of gifts.

As for you getting a BTL mortgage you will need a regulated BTL if you're parents are going to live there. You'll have all the responsibilities of being a LL including any rental income to HMRC. You'll need to pay Caputal Gains Tax (possibly) when you eventually come to sell the property. As your parents are gifting this money to you with reservation (the money is to be used to buy a property for them to live in) it will be taken into account when calculating Inheretance Tax although that might end up being 0% depending on the value of their other assets.

All in all this won't be as straightforward as you think.

kingstreet

If you do go the regulated BTL route, expect additional scrutiny of your personal income as unlike usual BTL rules, for a regulated BTL the rent is less important than your ability to cover the cost of the mortgage if they don't pay the rent, or you choose not to charge it.

Do not expect for them to move in and start claiming housing benefit/local housing allowance either. The rules on contrived tenancies are there to prevent this.

martindow

kingstreet wrote: »

Do not expect for them to move in and start claiming housing benefit/local housing allowance either. The rules on contrived tenancies are there to prevent this.

Particularly as they may be seen to have reduced their savings in order to claim means tested benefits. This could be true whoever they rent from.

ER0108

They would not claim any housing benefit etc.

They would be purely be paying the mortgage payment nothing extra. They are too old to get a mortgage and I was wondering if I could help in anyway.

ognum

ER0108 wrote: »

They would not claim any housing benefit etc.

They would be purely be paying the mortgage payment nothing extra. They are too old to get a mortgage and I was wondering if I could help in anyway.

It sounds like you are a lovely person who is trying to help your relatives but do think carefully, you may find yourself wound into a difficult situation.

If you get the mortgage this will be your house not theirs. You will be their landlord and the money they give you to pay the rent/mortgage will be taxable to you as income so they will need to pay you 20/40% more than the actual mortgage payment in order for you to break even. You will also be responsible for maintaining g the property and all the safety checks needed as a LL.

THis will be your property, if you don't live there you will need to pay capital gains tax when you sell.

If your grandparents need care in their old age the authorities may claim deprecation of assetts as they have given their capital to you.

It's very complicated, you need some professional guidance don't go into this without a lot of thought.