Advice needed in Inheritance tax and remortgage...

paulapudding

Hi,

Hope I'm posting in the right area (apologies if not)! Did post originally on families, pointed in this direction!

My lovely mam and stepdad would like to (big style) help us, by giving us approx £40k for our mortgage.
They are about to sell they're house and move into sheltered accom (mam been ill recently). We've tried to look into inheritance tax, but I'm lost!

Our situation is I'm currently on maternity leave from full time job, due back end of Sept. Having previously gotten badly into debt, the £110k mortgage we have is not with a high st lender (we currently pay Bank of England rate). Our 4 year "tie in" comes to an end next month. Only some redundancy money has kept us going. We are hoping to remortgage to bring our payments down (if any lender will deal with us, in current climate...) so I could work part time/spend time with DS.

Would cash from parents be subject to any tax?

Do you think after paying 4 years of high mortgage payments with no arrears, a reputable company would deal with us?

Any advice would be greatly appreciated!

Paula

jamesd

It wouldn't be subject to inheritance tax unless they died within 7 years. Yes, after 4 years and with much lower loan to value you should have an excellent chance of a mortgage from a mainstream lender. Time to get a two Pound statutory credit report from Experian and Equifax and make sure that their reports are correct. Then mortgage broker time.

If your parents are expecting the council to pay for sheltered accommodation they should be aware that the council is likely to treat this gift as if it is still part of their capital when calculating if they have to pay.

paulapudding

Thanks so much for the reply jamesd!

Had a look at the gov website about the £312k nil band. If they are under this limit, would tax still be due if (god forbid) something happened within the 7 year limit?

Paula

jamesd

If under twice that there would be no inheritance tax to pay. As of this tax year the second surviving partner can use any previously unused part of the nil band of the first to die. Inheritance by a spouse uses none of it so the limit is twice the single person's limit for a couple.