Tax implications of parents paying our mortgage.

dianemiles
dianemiles Posts: 9 Forumite
in Cutting tax
Any advice would be greatly appreciated, please feel free to move this if I have posted this in the incorrect thread!
Can anyone help I’m struggling with knowing the best way of going about this?
My step nan has died and her substantial estate has now been finalised and passed onto my step mum and dad.
They want to help myself and husband out and pay our mortgage for us every month, the mortgage cost is currently £994 a month and has 13 years to run, they want to put the money in our bank account every month. Which is very kind of them. I’m struggling to know the tax implications from this gift and would they not be better to pay the mortgage completely in one go?? Which is currently at £144,000 and they could easily afford to do.
Any advice would be greatly appreciated.
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Comments

  • molerat
    molerat Posts: 31,851 Forumite
    Name Dropper Photogenic First Post First Anniversary
    No tax implications for you whichever route they choose but there could be tax implications for their estate if they were to die in the near future.
  • Mojisola
    Mojisola Posts: 35,557 Forumite
    Name Dropper First Post First Anniversary
    dianemiles wrote: »
    They want to help myself and husband out and pay our mortgage for us every month, the mortgage cost is currently £994 a month and has 13 years to run, they want to put the money in our bank account every month.

    I’m struggling to know the tax implications from this gift and would they not be better to pay the mortgage completely in one go??

    Read up on inheritance tax. If they pay off your mortgage now and live for seven years, the gift won't be included in their estate.



    Do they have any other reason why they don't want to hand over a lump sum?
  • dianemiles
    dianemiles Posts: 9 Forumite
    That is my concern my Dad is 75 if we go the pay monthly route he will be 88 at the end of the mortgage, my Step Mum would be 74 at the end. If we went the lump sum way would that be the better route as they are still younger?
    Thank you for your time
  • Mojisola
    Mojisola Posts: 35,557 Forumite
    Name Dropper First Post First Anniversary
    dianemiles wrote: »
    That is my concern my Dad is 75 if we go the pay monthly route he will be 88 at the end of the mortgage, my Step Mum would be 74 at the end. If we went the lump sum way would that be the better route as they are still younger?

    As long as they are happy with that - it is their money!
  • agrinnall
    agrinnall Posts: 23,344 Forumite
    First Post Combo Breaker
    Paying the mortgage off now (assuming your lender will allow that) is by far the best option: not only will it greatly reduce the likelihood of IHT being due it also means that they pay a huge amount less than they would paying monthly for 13 years - that £144,000 will cost a great deal more than that in total if paying interest as well as capital.
  • badmemory
    badmemory Posts: 7,788 Forumite
    First Anniversary Name Dropper First Post
    Is it possible that they are both gifting £3k pa to each of them? Would that solve the IHT problem?
  • Flugelhorn
    Flugelhorn Posts: 5,576 Forumite
    First Anniversary Name Dropper First Post
    badmemory wrote: »
    Is it possible that they are both gifting £3k pa to each of them? Would that solve the IHT problem?

    Good point - may be they are well read up on IHT
  • dianemiles
    dianemiles Posts: 9 Forumite
    I’m not to sure about the gifting part. They do both own a rental property too that they receive an income from. I did work the rough figures out and they will have to pay an extra £20,000 if they do it the monthly way, that’s if interest rates stay as they are. I have got a telephone chat with our financial adviser next week.
  • JGB1955
    JGB1955 Posts: 3,479 Forumite
    First Anniversary First Post Name Dropper
    If they haven't made a £3,000 gift during this or last tax year they can each gift £6,000 now and another £3,000 on 6 April (or so I believe)!
    #2 Saving for Christmas 2024 - £1 a day challenge. £131 of £366
  • dianemiles
    dianemiles Posts: 9 Forumite
    That’s useful information no we have never received any gifts from them.
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