Mortgage Gift

rbheda

Hi,

I hope you can help me

I am in the process of buying a shared ownership flat. I am being help with a 10k gift from my mother. I am quite far through the process and have only just found out the gift rules. I know I can receive a 3k gift a year from my parents, and if this wasn't used for the previous year I could have been gift 6k this year, tax free.

But i am too far down the process to change this now. So I need to know that implications on tax for a 10k gift?

I know there is no tax if my mother lives for another 7 years and there is a percentage that has to be paid if she does which decreases as the years pass.

So if I am being gifted 10k, what is the worse case scenario if my mother passes away? I believe the highest percentage is 40% tax. Is this 40% of the 10k or on 4k as I get a 6k gift allowance for this year?

Please help!

HappyHarry

rbheda wrote: »

Hi,

I hope you can help me

I am in the process of buying a shared ownership flat. I am being help with a 10k gift from my mother. I am quite far through the process and have only just found out the gift rules. I know I can receive a 3k gift a year from my parents, and if this wasn't used for the previous year I could have been gift 6k this year, tax free.

But i am too far down the process to change this now. So I need to know that implications on tax for a 10k gift?

I know there is no tax if my mother lives for another 7 years and there is a percentage that has to be paid if she does which decreases as the years pass.

So if I am being gifted 10k, what is the worse case scenario if my mother passes away? I believe the highest percentage is 40% tax. Is this 40% of the 10k or on 4k as I get a 6k gift allowance for this year?

Please help!

First question is: Is your mother's estate over the IHT limit? If not, then there will no IHT to pay anyway, so no need to be concerned, and you can stop reading at this point.

Next question if you're still reading: Has you mother given away more than £325,000 in the past 7 years. If not, then her estate will be liable for any IHT bill, not you. Again, stop reading if this applies.

OK, if you're still reading, then if your mother dies within the next seven years, you are likely to have to pay 40% of either £7,000 or £4,000 depending on whether or not you could roll your mother's annual exemption back a year. So a bill of either £2,800 or £1,600 could be payable.

davidmcn

...and if she doesn't gift the money and therefore still has it in her estate when she dies, it's liable to be taxed anyway (if the estate is over the relevant limit). While the possibility of being taxed is something to bear in mind, it's not really a reason to refuse a gift, particularly if you'd be inheriting the estate.

rbheda

HappyHarry wrote: »

First question is: Is your mother's estate over the IHT limit? If not, then there will no IHT to pay anyway, so no need to be concerned, and you can stop reading at this point.

Next question if you're still reading: Has you mother given away more than £325,000 in the past 7 years. If not, then her estate will be liable for any IHT bill, not you. Again, stop reading if this applies.

OK, if you're still reading, then if your mother dies within the next seven years, you are likely to have to pay 40% of either £7,000 or £4,000 depending on whether or not you could roll your mother's annual exemption back a year. So a bill of either £2,800 or £1,600 could be payable.

Thank you for you reply. That is helpful. When I say my mothers house, it is my parents, but only my mum is gifting me. The property is worth around £500,000. Im not sure if this is over the IHT limit

AnotherJoe

It isn't, and you are worrying needlessly. Enjoy your new house