Paying deposit for daughter

WalkingbacktoHappiness

First post so please be gentle as unsure this is the right place to post.

My daughter had a policy that matured and as she didn't need the money (apart from car insurance payments for a few years) she let me use the money to do work around the house - bathroom, kitchen etc.

I am now in a position to pay back approx £8.5k so she's putting it towards house deposit (very sensible daughter :A) and I want to pay her back adding interest so give her £10k.

How would this be looked at by HMRC regarding tax? Basically I'm paying back money I originally put away on a monthly basis for her, policy matured but she borrowed me the money.

Thank you in advance.

Pixie5740

WalkingbacktoHappiness wrote: »

First post so please be gentle as unsure this is the right place to post.

My daughter had a policy that matured and as she didn't need the money (apart from car insurance payments for a few years) she let me use the money to do work around the house - bathroom, kitchen etc.

I am now in a position to pay back approx £8.5k so she's putting it towards house deposit (very sensible daughter :A) and I want to pay her back adding interest so give her £10k.

How would this be looked at by HMRC regarding tax? Basically I'm paying back money I originally put away on a monthly basis for her, policy matured but she borrowed me the money.

Thank you in advance.

There is no gift tax in the UK so HMRC won't be interested in this. However, being pedantic, there would be income tax to pay on interest charged on the loan so you're better off saying the extra £1,500 is a gift from mother to daughter and not interest.

AnotherJoe

There's no interest because it's a gift. The lender/solicitor will require a letter stating the sum from you to her is a gift. Don't get into any details, just state its a gift, in one line.

00ec25

stick to the story it is a gift from parent to child and no one will ever question it and therefore spot it is her own money being returned to her with (taxable) interest added.

Such a gift on house purpose is of course perfectly normal and totally tax free for both persons (provided, in your case, you live for a further 7 years in respect of your own inheritance tax estate)