Deposit - Loan or gift?

[Deleted User]

Hi everyone,

My mother passed away unexpectedly last year, and this has left my dad with money in the bank from her life insurance and pension pot. I did not receive any inheritance, and I am mainly interested in my dad being (and feeling) financially secure, since he has now retired 5 years ahead of getting his state pension.

He has expressed interest in helping me get on the property ladder by giving me £40,000 for my deposit. I am very grateful for this, but I wasn't so keen on it being a gift - he has worked his entire life and I wanted him to enjoy his money, so I wanted it as a loan. However, I have now learned that being given a loan for a deposit is (understandably) added to the mortgager's risk profile and may cause problems for me.

My question is this: If he gives me it as a gift, which is he happy to do, am I able to give him a gift later to show my appreciation, or is this fraud? There would be no obligation for me to pay it back, I just feel a bit bad accepting it.

Also, bonus question: If I give him a gift later on, does this incur taxes of any form? I don't think I'll die within 7 years, but are there taxes other than inheritance tax to watch out for?

Thanks for any help you can offer on this!

[Deleted User]

You can give him a gift in the future - but do not tie it him gifting you money, either officially or unofficially. Pretending a loan is a gift could lead to fraud markers, which are a lot less fun than they sound.

The only tax to worry about is if either of you die within seven years of making the gift, but that is taxed against the estate, not the recipient.

When he gives you £40k, it's from his funds. If the lender asks further questions about the source of the funds, that's when he would provide any detail.

[Deleted User]

Fantastic, it looks like I'm okay then. Thanks for your help!