Gifting money to a friend to help buy a house

MaryNB

shapedcarrot799 said:

Thanks everyone. I will make it as a gift. My own estate will be subject to inheritance tax if I die (not planning to!) so I'm going ot give £3000 before april 5th and the rest after that. I'm surprised mortgage lenders care if the money is sitting in someone's account how do they know if it's a gift or savings?

Your friend's solicitor will also be acting on behalf of the lender and will be carrying out anti money laundering checks. They'll ask for bank statements and will notice if the £20k is received as a lump sum (or a small number of deposits over a short period of time) rather than accumulated over several months/years.

If your friend says their deposit is all their own savings but can't prove the lump sum is from their own income (or inheritance) well that's a red flag for the solicitor. Also they'll be committing mortgage fraud by not claiming something is a gift when it is. Lenders have rules over gifted deposits and will require a gifted deposit letter. 

prowla

shapedcarrot799 said:

Hello,
I want to help my oldest friend who is a hardworking single mum buy a house. I want to give her 20k to give her a deposit and she will pay me back as and when she can.
I'm advised I can only give 3 k and then I have to declare the rest to HMRC which could be subject to inhertance tax. This seems quite complicated, is this the case?

Advise is appreciated!!

That's not a gift.

HappyHarry

shapedcarrot799 said:

My final quesiton is that do I have to make a declaration to HMRC when I make the gift? Or only if I die?

You do not have to make any declaration to HMRC.

If you die within 7 years of making the gift, then your executors will add the value of the gift (less the annual exemption) back into your estate for the IHT calculation.

shapedcarrot799

Thank you everyone - these comments are really helpful!!! I'm now clear. 

peb

However as already pointed out most lender's won't accept this.  Also look into if there's going to be an issue with any benefits your friend receives.