Lending money to buy house-Tax Implications.

Daveinlincoln · 10 June 2018 at 9:07AM

Hi all,

My Mum is elderly and now wants to downsize.

She has seen a ground floor flat thats empty and she wants to buy it.

Her current house is worth £200k and will sell quickish,her new flat is on sale for £90k so theres a healthy profit there.

The issue is that she wants to buy the flat first and do it up whilst her current property is selling-this makes sense as it'll cut down on hassle and she can just move straight in.

She has £50k in savings so needs another £40k to purchase the flat. I have £20k i can lend her and another family member will lend the other £20k (Granddaughter)...Are there any tax implications doing it this way?...either for her receiving the loans or for us when we get the money back?

Thanks in advance for any help.

00ec25 · 10 June 2018 at 10:12AM

as you know from looking at any savings account, you only pay tax on the interest you receive, not on the money making up the balance

if you do not charge your mother any interest on the loan then there are no tax implications for either you or her.

Of course if she dies before she repays the loan there would be other implications, so it may be safest to write down that it is a loan repayable to you with no interest. Get her to sign it and that way you are covered in terms of claiming against her estate.

She will of coruse have to pay the higher rate SDLT on the purchase since she won't have sold her home at that point, but she can then get that extra tax refunded if she sells it within the relevant time scale
https://www.gov.uk/government/publications/stamp-duty-land-tax-apply-for-a-repayment-of-the-higher-rates-for-additional-properties

Simona_Fire · 10 June 2018 at 5:31PM

I agree with 00ec25.

Lending money to buy house-Tax Implications.

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