Gifting money towards a house purchase to a family member

Abzinthe

Good Evening 
I am looking at either Gifting money to a family member or putting the money into their account etc.
The lawyers form has a few options on contributing money . Like Gift , Loan etc
now I don’t want to be taxed in any way if I am giving this money towards the house .
I know the Lawers will do checks I assume to prove where the money has come from 
any advice on how to contribute the money without any implications on my end.

Also money is a larger amount. And I understand I will have no Interest in the Property.

user1977

You won't be taxed (at most, if you die within 7 years it will be treated as part of your estate for Inheritance Tax purposes).

El_Torro

The only downside is if it's actually a loan which is disguised as a gift. If you expect them to pay it back then you have no legal recourse to actually get it back. 

If you're happy that it's a genuine gift then neither of you has an issue (apart from the potential Inheritance Tax which has been mentioned). 

Reader18

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Keep_pedalling

Gifting never has a negative effect on IHT, at worst dying within 7 years of the gift your estate pays the same amount of IHT as it would have done if you had never made the gift. If your este is large enough to pay IHT and you are currently in good health you can cover that 7 year period with fairly cheap term life insurance.

Abzinthe

Reader18 said:

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Hi Ok thanks that’s good to hear ,  I am actually going to be Giving the Substantial gift to my Parents to help them on Purchasing a property.
so I guess the the rules applies the same?

Keep_pedalling

Abzinthe said:

Reader18 said:

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Hi Ok thanks that’s good to hear ,  I am actually going to be Giving the Substantial gift to my Parents to help them on Purchasing a property.
so I guess the the rules applies the same?

This is one sort of gift that could create a bigger IHT bill, but you would need a whole set of unfortunate early deaths to create an issue. If for instance you gifted them £200k and they both died within 7 years leaving you the house they purchased with that gift,  your estate would now have that asset back but should you also die before the 7 years are up the original £200k gift would also still have to be declared so effectively be counted twice.

TheJP

Abzinthe said:

Reader18 said:

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Hi Ok thanks that’s good to hear ,  I am actually going to be Giving the Substantial gift to my Parents to help them on Purchasing a property.
so I guess the the rules applies the same?

Out of interest are they buying a council house via the right to buy scheme?

Abzinthe

TheJP said:

Abzinthe said:

Reader18 said:

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Hi Ok thanks that’s good to hear ,  I am actually going to be Giving the Substantial gift to my Parents to help them on Purchasing a property.
so I guess the the rules applies the same?

Out of interest are they buying a council house via the right to buy scheme?

Hi no it isn’t a council house or in any scheme 

Abzinthe

Keep_pedalling said:

Abzinthe said:

Reader18 said:

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Hi Ok thanks that’s good to hear ,  I am actually going to be Giving the Substantial gift to my Parents to help them on Purchasing a property.
so I guess the the rules applies the same?

This is one sort of gift that could create a bigger IHT bill, but you would need a whole set of unfortunate early deaths to create an issue. If for instance you gifted them £200k and they both died within 7 years leaving you the house they purchased with that gift,  your estate would now have that asset back but should you also die before the 7 years are up the original £200k gift would also still have to be declared so effectively be counted twice.

Hi thanks for your reply , could you clarify and elaborate on what you have stated here I did not quite understand? Thanks

Keep_pedalling

Abzinthe said:

Keep_pedalling said:

Abzinthe said:

Reader18 said:

We have recently done this and made a substantial gift of money  to help with a house purchase. It’s very straight forward, you give the money accompanied by a letter that says it’s a gift and you have no interest in the property. We also had to give photo copies of passports and proof of address with out council tax account.  If we live for 7 years then our adult child will not pay any IHT on the gift. It’s also worth remembering you and your spouse (I’m making an assumption here so forgive me if incorrect) can give your child 3 k each in a given tax year and as a one off, can also give 3 k each for the previous tax year so eg in this financial year you could give a 12 gift with no tax implications. 

Hi Ok thanks that’s good to hear ,  I am actually going to be Giving the Substantial gift to my Parents to help them on Purchasing a property.
so I guess the the rules applies the same?

This is one sort of gift that could create a bigger IHT bill, but you would need a whole set of unfortunate early deaths to create an issue. If for instance you gifted them £200k and they both died within 7 years leaving you the house they purchased with that gift,  your estate would now have that asset back but should you also die before the 7 years are up the original £200k gift would also still have to be declared so effectively be counted twice.

Hi thanks for your reply , could you clarify and elaborate on what you have stated here I did not quite understand? Thanks

Any gift over your annual exemption stays in your estate for 7 years but if you inherit that gift back on the death of the recipient your estate has gained the inheritance but the original gift is also counted within your estate if you also happen to die within 7 years. So for example if you have assets of £800k give away £100k your actual net worth is reduced to £700k but for 7 years it is still treated as £800k for IHT purposes. If the person you gifted to dies a couple of years later and leaves you £100k in their will and you die the following year you now have £800k in assets but because you made a gift of £100k within 7 years that gift has to be added to your estate on the IHT return and you estate will be taxed on £900k.

This is all highly unlikely but it could happen.