Mortgage draw down and savings account

JonnyH83

Hi all,

Newbie here so apologies in advance if this is in the wrong section.

I wanted to check something with you as I gear that I have inadvertently done something stupid and now I am panicking about it!

In September earlier this year I received my mortgage draw down for home improvements, however the actual building work wont start for about 3 months. As I didn't want the money to just sit in my current account I moved it to my sons' future saver accounts (I have twin 3 year old boys and opened the accounts for them at the bank in which I have my current account).

I have since moved the funds back in to my current account have realised it probably wasnt a good idea and have earned approximately £90 interest in each of the future saver accounts (£180 in total).

Appreciating that I will most probably have to pay tax on this as it is over £100 in interest, I wanted to know if there are other tax implications, e.g. inheritance tax as the proceeds massively exceed the £3000 annual limit. I just dont know if this still applies if the proceeds are from effectly a loan (mortgage)? Do I need to speak with HMRC or isn't it an issue? Need someone to put my mind at rest!

Hoping the above makes sense but if you need further info please let me know.

Thank you in advance.

Jon

davidmcn

You'd need to confirm what your intention was by moving the money around, but the simplest explanation would be that you were lending the money to your sons.

In which case the interest accrued is part of your sons' Income Tax affairs. Inheritance Tax is irrelevant because it always formed part of your estate, and in any event the annual lifetime gift allowance only matters if you die within the following seven years (or I suppose if either of your sons did, if they are unusually wealthy kids).

The fact the money came from a loan is irrelevant.

JonnyH83

Thanks Davidmcn,

That makes me feel a little better.

So I would just need to tell HMRC the amount of interest earned whilst the money was in their accounts and pay the respective tax which presumably will be based on my tax rate, e.g. 40%?

Regards,
Jon

davidmcn

JonnyH83 wrote: »

So I would just need to tell HMRC the amount of interest earned whilst the money was in their accounts and pay the respective tax which presumably will be based on my tax rate, e.g. 40%?

Wasn't sure of the rules myself but it's explained here - over £100 for you so yes, all taxed at your marginal rate.