Buying a house fully with cash from father

Lauraairving

Hello I was wondering if anyone could help please

My mum passed away and my father received some money from her pensions and work life insurance.

My dad has paid off his mortgage so he owns his house fully now.

We’re currently renting and my dad wants to help us financially and buy us the house we’re renting. The landlord has agreed and would like to sell the house for £97,500.

My question is how do we go about this please?
We’ve not had an financial advise yet but I’ve read solicitors don’t always know the best way to go about things.
We don’t know if it’s best for my dad to buy the house and pay the stamp duty and just add this house to his will (his current house will be left to me in his will)
Or if there’s some way he can buy us the house as a “gift”. I’ve read something about having to pay inheritance tax if he doesn’t survive 7 years after this.
We’re completely lost at what to do. If anyone has any advice we’d be very grateful. Thank you x

Bossypants

If your Dad is making a gift to you, you will have to pay inheritance tax on it whichever way he makes it if he doesn't survive for 7 years afterwards. That being the case, the simplest thing to do here would be for Dad to gift you the cash, which you would then use to buy the house. Anything else would just be more effort and cost in solicitors' fees.

Lauraairving

Thank you. I didn’t realise he’d be able to just gift me the cash. I thought he’d make the transaction for the house and then we’d sign it in our name.

Lauraairving

Would I pay income tax too if he just gave me the money?

Bossypants

No, the only tax you'd be liable to pay is inheritance tax if he should die before the 7 year mark.

G_M

* if dad buys the house he'll have to pay extra SDLT as a 2nd home.
* if you buy the house you will be a First Time Buyer. Much better.


Your solicitor will want to do money laundering checks on the money (to ensure you didn't get from importing opium etc!), but it sould be a simple matter to sow that
a) dad got it from Insuance and
b) dad gave it to you.


Provided dad survives 7 years it would not be part of his Estate for Inheritance Tax.

Lauraairving

Right ok thank you for your help! Hopefully things will be straight forward.

G_M

Lauraairving wrote: »

Would I pay income tax too if he just gave me the money?

No. It's a gift, not income.


(unless you do dad's gardening for him at minimum wage for the next 300 years till you've earned it all!)

Lauraairving

Thank you G_M. But if dad bought it as a second house in his name and paid stamp duty and then passed away within 7 years, would inheritance tax still be paid?

I’m so confused as I’ve read you can only give someone £3000 per year so I don’t get how he can just transfer me £97,500.

agrinnall

And of course assuming your mum's estate went to your dad then his estate might have to be worth more than £900,000 before inheritance tax is due.

Lauraairving

My mum and dad we’re married so all assets were joint. Their assets weren’t more than the limit when she passed away. His house is worth about 90k and this one will be around 110k hopefully once all done up. He has a life insurance for £200,000 so I don’t know if that makes a difference.