Loan to family member

iansmum

I have googled this question but a lot of the info seems out of date so here I am!
My husband and I want to loan our son £20000 for him to finish a build project at his home. It will be a loan, and it will be paid back, and we don’t know long that will take. (That isn’t a problem to us).
Are there any implications to this with HMRC? The money will be moved from a savings account into our joint account and paid from there so technically from both of us.
Would appreciate any thoughts or advice. Many thanks.

[Deleted User]

Only if you're charging interest.

iansmum

Deleted_User wrote: »

Only if you're charging interest.

No, there won’t be any interest. Only I am under the impression you can’t ‘gift’ a lot of money per year and wondered how we can prove it’s a loan.
Thanks.

[Deleted User]

You can gift as much as you like. The only implication is inheritance tax if you die within 7 years.

iansmum

Thank you. :beer:

TripleH

If you want to have it recorded as a loan, put down on a piece of paper how much you are lending and when / how it will be repaid. Get both parties to sign it along with a witness before any money is handed over.

If the worst happens you have proof the money was a loan and the outstanding value will get added back to the estate for working inheritance tax liabilities.

Will it work in court if there is a dispute? Probably not, but it should provide evidence to show HMRC if they ask questions.

iansmum

TripleH wrote: »

If you want to have it recorded as a loan, put down on a piece of paper how much you are lending and when / how it will be repaid. Get both parties to sign it along with a witness before any money is handed over.

If the worst happens you have proof the money was a loan and the outstanding value will get added back to the estate for working inheritance tax liabilities.

Will it work in court if there is a dispute? Probably not, but it should provide evidence to show HMRC if they ask questions.

Thanks. Out of curiosity would £20k make a lot of difference to any IHT implications? I don’t really understand when this would come into play. What kind of figure are we talking about?

Thrugelmir

iansmum wrote: »

Thanks. Out of curiosity would £20k make a lot of difference to any IHT implications? I don’t really understand when this would come into play. What kind of figure are we talking about?

The outstanding loan would still be an asset of the estate in the event of your untimely demise.

Do you wish to gift or lend the money?

pracer26

Yes, so the only implication is that if it's a gift and not a loan, then if you were to pass away within 7 years, it is regarded as part of your estate for the purposes of IHT - so it's included in the calculation of whether you have more than £325,000 of assets.

iansmum

pracer26 wrote: »

Yes, so the only implication is that if it's a gift and not a loan, then if you were to pass away within 7 years, it is regarded as part of your estate for the purposes of IHT - so it's included in the calculation of whether you have more than £325,000 of assets.

Thank you! That sums it up nicely for me. Much appreciated.