Cam a parent help a child with mortgage over payment without being taxed? 22 January at 1:31AM in Mortgages & endowments 9 replies 431 views

Fleurviolet

I currently have a fixed rate mortgage with a low interest rate which is due to expire later this year. I fully expect to have to pay substantially higher interest than I currently do. Due to a change in my personal circumstances in addition to the increased cost of living, I am going to struggle with the higher mortgage cost.

My parents are in a position where they can over pay my mortgage prior to remortgaging by around £12,000. 

Are they able to do so without having to pay tax? (in the sense that the money would be a gift of sorts).

Edi81

Yes. In the uk there is no tax on gifts like this. 

Sncjw

Double check how much you canover pay in a.year and when the year runs from.as.yoh will likely be charged a fee.if your over 

ManekiNeko

There's no tax, but if your parents were to pass away within the next 7 years there might be an IHT (inheritance tax) obligation.

Each parent can give you a gift of up to something like £3k a year without triggering an IHT obligation though. I assume this is per tax year, not calendar year, so you might be better served if they wanted to give you £6k (£3k + £3k) before April, and the same again afterwards.

Please do your own research into this though as these figures are based on my best memory of another forum post, I know essentially zero about IHT.

diystarter7

ManekiNeko said:

There's no tax, but if your parents were to pass away within the next 7 years there might be an IHT (inheritance tax) obligation.

Each parent can give you a gift of up to something like £3k a year without triggering an IHT obligation though. I assume this is per tax year, not calendar year, so you might be better served if they wanted to give you £6k (£3k + £3k) before April, and the same again afterwards.

Please do your own research into this though as these figures are based on my best memory of another forum post, I know essentially zero about IHT.

Exactly what we have done and more

Then there is the 7 year tapper rule on IHT 

user1977

diystarter7 said:

ManekiNeko said:

There's no tax, but if your parents were to pass away within the next 7 years there might be an IHT (inheritance tax) obligation.

Each parent can give you a gift of up to something like £3k a year without triggering an IHT obligation though. I assume this is per tax year, not calendar year, so you might be better served if they wanted to give you £6k (£3k + £3k) before April, and the same again afterwards.

Please do your own research into this though as these figures are based on my best memory of another forum post, I know essentially zero about IHT.

Then there is the 7 year taper rule on IHT 

Yes, and the fact that gifting doesn't mean more IHT needs to be paid - if you didn't make the gift at all, the money would presumably still form part of your estate and be taxable anyway.

Keep_pedalling

Some duff information on IHT in the above posts. First off taper relief does not apply to small gifts like this, you need to exceed your NRB (£325k) for that to apply and then it only applies to the portion above the NRB, Gifting does not trigger an IHT obligation any IHT due comes out of the remaining estate not from the person receiving the gift.

If the OPs parents did not use any of their annual exemptions last year then the whole £12k becomes exempt as they can carry forward last years allowance.

Annisele

Fleurviolet said:

Are they able to do so without having to pay tax? (in the sense that the money would be a gift of sorts).

I just want to push slightly on the "of sorts" comment there - would it be a gift or not? If by "of sorts" you mean your parents are going to lend you the money at an interest rate below that charged by the bank, then the interest portion of the payment you make to your parents would be taxable in their hands. Whether they actually paid tax would depend on the rest of their tax position.

If the "of sorts" just means your parents would be paying your lender rather than you directly, then ignore the above - there wouldn't be any income tax then.

(I know I'm probably making a fuss about a throwaway comment, but in the context of mortgages people here often talk about "gifts" that are actually loans - so I thought it was worth clarifying.)

ManekiNeko

Keep_pedalling said:

Some duff information on IHT in the above posts. First off taper relief does not apply to small gifts like this, you need to exceed your NRB (£325k) for that to apply and then it only applies to the portion above the NRB, Gifting does not trigger an IHT obligation any IHT due comes out of the remaining estate not from the person receiving the gift.

If the OPs parents did not use any of their annual exemptions last year then the whole £12k becomes exempt as they can carry forward last years allowance.

Thanks, this is useful. And yes - I did say it wasn't my area lol 😉

amnblog

As set out by Keep Pedalling

This is how it works

https://www.gov.uk/inheritance-tax/gifts