Car Loan from Parent

kylenkelly

My wife and I have kindly been offered a loan from her mother to avoid car finance. We have agreed a payment schedule but wondered if there were any tax implications as a result. The amount is more than the £3k gift allowance but as its a loan is this relevant? Thanks. 

JGB1955

Not relevant - it's not a gift, it's a liability.

GeordieGeorge

No tax liabilities other than tax on the interest they receive if it takes them over their annual allowance.

[Deleted User]

The over 3k would only be "relevant" if they died within 7 years.

Keep_pedalling

Just for clarification, the £3k pa is not an allowance it is an exemption. Allowances suggest you can’t give more, but you can give as much as you like and even exceeding the exemption has no negative consequences on any IHT that may need to be paid in the future.

maxximus75

I would have thought it would only be classed as a gift, if you had no plans on paying back?

If you are making monthly repayments and have something drafted up and signed/dated by all parties and witnessed - then I would thought it be classed as a loan.

Keep_pedalling

maxximus75 said:

I would have thought it would only be classed as a gift, if you had no plans on paying back?

If you are making monthly repayments and have something drafted up and signed/dated by all parties and witnessed - then I would thought it be classed as a loan.

Yes it would be although sometimes perinatal loans do end up turning into gifts we loaned one of our children money to purchase a car, but half of it turned into a gift when our DIL became pregnant.