Tax efficient way to receive gifted money for home deposit

fuzzzzy

horsewithnoname said:

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. 

That is not strictly true. Taper relief only applies to gifts that use up more than the tax free allowance of £325k per person. Gifts use up the tax free allowance first and the remainder of the allowance is then used up by the rest of the estate in that order, so there is no taper relief saving unless the gifts are a significant size. 

https://www.gov.uk/inheritance-tax/gifts#:~:text=The 7 year rule,on when you gave it

But there would be no IHT to pay by the OP themselves if the gift maker died within 7 years and the gift was below the allowance threshold. The gift would just take up some of the available allowance below the threshold. They would only be liable for a charge themselves if the gift was sufficiently large to exceed the threshold and the gift maker died within 7 years of making the gift, then taper relief would apply.

Albermarle

silvercar said:

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. 

As per the above post.
Taper relief only applies in a small number of cases where the gift is very large/above £325K, and then the receiver of the gift can become liable for IHT. 
In the large majority of cases, the receiver of the gift will not be liable for IHT and the gift will be counted back into the estate 100% if the donor dies within 7 years.