PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Parent living with child

Options
A parent does not own their own property. They live in their adult child's property with their adult child. They contribute £200 a month towards food/bills etc. What implications may their be for a) the adult child's tax and b) potential inheritance tax in the future?

The parent sold their own house 10+ years ago. 

Should there be some kind of formal lodging agreement in place? Or is it OK to keep it informal (I.e. Nothing signed and no contract). 

It seems that less than £7500 a year does not need to be declared if you have a lodger. But this is a slightly different arrangement from usual and I wonder if letting family live with you makes any difference to anything.

Any advice welcome! 
«1

Comments

  • chanz4
    chanz4 Posts: 11,057 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Xmas Saver!
    any benefits?
    Don't put your trust into an Experian score - it is not a number any bank will ever use & it is generally a waste of money to purchase it. They are also selling you insurance you dont need.
  • GDB2222
    GDB2222 Posts: 26,209 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    They have formed a single household, sharing expenses. There are no tax implications. 
    No reliance should be placed on the above! Absolutely none, do you hear?
  • user1977
    user1977 Posts: 17,785 Forumite
    10,000 Posts Seventh Anniversary Photogenic Name Dropper
    Well, there's a council tax implication if it means the child no longer qualifies for the single person discount.

    But otherwise I don't see any implications for other taxes. What are you thinking the inheritance tax effect may be?
  • kiss_my_face
    kiss_my_face Posts: 19 Forumite
    Eighth Anniversary 10 Posts Name Dropper
    chanz4 said:
    any benefits?
    No benefits for either party. Just state pension for parent. 
  • kiss_my_face
    kiss_my_face Posts: 19 Forumite
    Eighth Anniversary 10 Posts Name Dropper
    user1977 said:
    Well, there's a council tax implication if it means the child no longer qualifies for the single person discount.

    But otherwise I don't see any implications for other taxes. What are you thinking the inheritance tax effect may be?
    Inheritance tax - if a payment of £200 a month is made over the period of 2 years and then the parent passes away, could that be seen as taxable for inheritance tax if no formal written agreement is in place. It may look like a series of 24 gifts totalling £4800 if there's no paper trail. 
  • sevenhills
    sevenhills Posts: 5,938 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 12 May 2024 at 8:32PM
    A parent does not own their own property. They live in their adult child's property with their adult child. They contribute £200 a month towards food/bills etc. What implications may their be for a) the adult child's tax and b) potential inheritance tax in the future?


     My 96 yr old relative pays me £200 per month for gardening and other help. I think you could easily pay the going rate for lodger/rent before there would be any implications.

  • user1977
    user1977 Posts: 17,785 Forumite
    10,000 Posts Seventh Anniversary Photogenic Name Dropper
    user1977 said:
    Well, there's a council tax implication if it means the child no longer qualifies for the single person discount.

    But otherwise I don't see any implications for other taxes. What are you thinking the inheritance tax effect may be?
    Inheritance tax - if a payment of £200 a month is made over the period of 2 years and then the parent passes away, could that be seen as taxable for inheritance tax if no formal written agreement is in place. It may look like a series of 24 gifts totalling £4800 if there's no paper trail. 
    They're not "gifts" though, they're contributions towards household expenses. If the parent was being excessively generous with their contributions then perhaps, but even so it's within the annual allowance (assuming there aren't other gifts on top).

    In any event, what's the concern? It's hardly a reason not to make the payments, as otherwise the parent will (presumably) still have the cash, and then it's definitely part of their estate for IHT purposes!
  • GDB2222
    GDB2222 Posts: 26,209 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    user1977 said:
    Well, there's a council tax implication if it means the child no longer qualifies for the single person discount.

    But otherwise I don't see any implications for other taxes. What are you thinking the inheritance tax effect may be?
    Inheritance tax - if a payment of £200 a month is made over the period of 2 years and then the parent passes away, could that be seen as taxable for inheritance tax if no formal written agreement is in place. It may look like a series of 24 gifts totalling £4800 if there's no paper trail. 
    You know that IHT is nil for the first £325,000?
    No reliance should be placed on the above! Absolutely none, do you hear?
  • kiss_my_face
    kiss_my_face Posts: 19 Forumite
    Eighth Anniversary 10 Posts Name Dropper
    edited 12 May 2024 at 8:50PM
    GDB2222 said:
    user1977 said:
    Well, there's a council tax implication if it means the child no longer qualifies for the single person discount.

    But otherwise I don't see any implications for other taxes. What are you thinking the inheritance tax effect may be?
    Inheritance tax - if a payment of £200 a month is made over the period of 2 years and then the parent passes away, could that be seen as taxable for inheritance tax if no formal written agreement is in place. It may look like a series of 24 gifts totalling £4800 if there's no paper trail. 
    You know that IHT is nil for the first £325,000?
    Yes, but the parent may inherit money themselves in the next couple of years that increases their savings and pushes them over that threshold should they pass away. 
    At moment this is all hypothetical, but really useful to get opinions to see what I've missed. 
  • sheramber
    sheramber Posts: 22,446 Forumite
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    Was there a mother who died previously and he was married to her when she died?

    Was mother’s nil rate band used after her death?
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.9K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.9K Work, Benefits & Business
  • 598.8K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.