Tax implications of parents paying our mortgage.

Keep_pedalling

It sounds like their joint estates are going to be in IHT territory, so yes they should look at gifting the whole thing outright. If your step Nan died within the last 2 years then the better option would be to complete a deed of variation to pass the money on, which would effectively remove the gift from their estate immediately.

dianemiles

Yes there estates will definitely be in IHT threshold. Thank you for all your comments it’s been very helpful, I will keep you updated.

londoninvestor

dianemiles wrote: »

They do both own a rental property too that they receive an income from..

If it turns out they aren't comfortable with paying it all now, it's worth thinking about whether this rental income would enable them to represent what they pay you (or at least some of it) as an IHT-exempt normal expenditure out of income.

dianemiles

That rental property and tenant was also left to them in the will, so they have inherited that too, does that change things?

londoninvestor

dianemiles wrote: »

That rental property and tenant was also left to them in the will, so they have inherited that too, does that change things?

As I understand it, the key thing for "normal expenditure out of income" is that the income is sustainable into the future (which rent from an inherited property generally is), rather than that the income is a long-standing thing from the past.

I'm no great expert on this though and wouldn't be comfortable concluding anything without professional advice.

Apodemus

The £3,000 each annual gift allowance wouldn’t be sufficient to pay the whole of the £12k mortgage costs, so that wouldn’t completely work from an IHT perspective. It may be, though, that their pension and rental income is sufficient that they can manage the mortgage payment as a “gift from income” for IHT purposes.

dianemiles

Thank you for that I’m going to have to ask where this money is coming from unfortunately.

badmemory

Apodemus wrote: »

The £3,000 each annual gift allowance wouldn’t be sufficient to pay the whole of the £12k mortgage costs.

Actually I think it would. It could be £3k from each parent to both of the couple. If it went from a joint account to a joint account then that would do it I believe. If it could be done from the profit on the rental income (previously not received) then that would cover the "from income" part.

agrinnall

badmemory wrote: »

Actually I think it would. It could be £3k from each parent to both of the couple.

It isn't because the £3K is the total that's allowed per giver, not per recipient, so a couple can only ever give away £6K a year under that rule.


https://www.gov.uk/inheritance-tax/gifts

badmemory

agrinnall wrote: »

It isn't because the £3K is the total that's allowed per giver, not per recipient, so a couple can only ever give away £6K a year under that rule.

Apologies - I was obviously having a senior moment!