Tax efficient way to receive gifted money for home deposit

Tigris1

Hiya,

 Luckily I have grandparents who are happy to help with our first house deposit.

It looks like the money will need to be "gifted" rather than a "loan", not to effect our mortgage in principle. 

The money to be gifted is a lot more than the £3,000 allowed anually. Sadly my grandparents are getting towards 90 now and it's highly unlikely they will be around in 7 years. One of there concerns is the inheritance tax we will need to pay IF they do sadly pass away. 

If they were to pass after 6 years (for example) rather than the full 7 years would this change how much inheritance tax is to be paid or would it be a flat rate on the initial gifted money?

Not too sure how to work it out?

Thank you

TheSpectator

Is IHT even an issue for them? How much is their estate worth?

Tigris1

TheSpectator said:

Is IHT even an issue for them? How much is their estate worth?

To be honest i'm not 100% sure but I know houses on there road are around £250-£270k plus savings and investments (My grandparents have been extremely tight on spending all there lives) so I would say they are just over.

Isn't the threshold around £500,000 when it's husband/wife combined? 

Hoenir

Tigris1 said:

One of there concerns is the inheritance tax we will need to pay IF they do sadly pass away. 

The Estate will bear the IHT not you. 

TheSpectator

Tigris1 said:

TheSpectator said:

Is IHT even an issue for them? How much is their estate worth?

To be honest i'm not 100% sure but I know houses on there road are around £250-£270k plus savings and investments (My grandparents have been extremely tight on spending all there lives) so I would say they are just over.

Isn't the threshold around £500,000 when it's husband/wife combined? 

Possibly up to £1million. Have a read here https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/

SVaz

No, it can be as much as £1 million when it’s a married couple. 

Tigris1

Hoenir said:

Tigris1 said:

One of there concerns is the inheritance tax we will need to pay IF they do sadly pass away. 

The Estate will bear the IHT not you. 

 Ah ok, I will let them know this.

They were expecting me to receive a large tax bill if they did sadly pass away within 7 years. 

horsewithnoname

Tigris1 said:

Hiya,

 Luckily I have grandparents who are happy to help with our first house deposit.

It looks like the money will need to be "gifted" rather than a "loan", not to effect our mortgage in principle. 

The money to be gifted is a lot more than the £3,000 allowed anually. Sadly my grandparents are getting towards 90 now and it's highly unlikely they will be around in 7 years. One of there concerns is the inheritance tax we will need to pay IF they do sadly pass away. 

If they were to pass after 6 years (for example) rather than the full 7 years would this change how much inheritance tax is to be paid or would it be a flat rate on the initial gifted money?

Not too sure how to work it out?

Thank you

If there was an iht liability then it is a sliding scale so after 6 years it would be a lot less than after one year. Details on the gov.uk site. 

silvercar

There is no limit on the amount “allowed” to be gifted. Anything in excess of the allowances could be subject to IHT, but that doesn’t mean the gift isn’t allowed. In fact, for large estates there is sense in gifting large amounts, living over 7 years means no tax on the gift and living less than 4 years just puts them in the same situation before the gift was made. With tapering relief available in between 4 and 7.

just in case, the grandparents should make the gift from both of them, rather than just one. 

Hoenir

Tigris1 said:

Hoenir said:

Tigris1 said:

One of there concerns is the inheritance tax we will need to pay IF they do sadly pass away. 

The Estate will bear the IHT not you. 

 Ah ok, I will let them know this.

They were expecting me to receive a large tax bill if they did sadly pass away within 7 years. 

They can tailor their wills for the gift if there are other beneficiaries to be considered. Treating the monies as an advance. 

Keep_pedalling

The £3,000 is an annual exemption not annual limit. It sounds like your GPs are well below IHT territory so there is no tax implication for you are them.