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Tax Implications For Making Cash Gift Toward Home Purchase

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hi all

was wondering what the tax implications are, if any, those who help with ftb's house purchase via cash gifts or loans.

What are the rules in general regarding gifts or loans ie contributions towards deposits by family members.

Is there a difference when it's a loan vs a gift ?

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hi all

was wondering what the tax implications are, if any, those who help with ftb's house purchase via cash gifts or loans.

What are the rules in general regarding gifts or loans ie contributions towards deposits by family members.

Is there a difference when it's a loan vs a gift ?

Not knowing full details, I can only give an outline answer. Also it is some years since i did a lot of tax, so may be a bit out of date. Tax law changes very rapidly. Seek professional advice, but the following is food for thought..

An outright gift is an potentially exempt transfer(PET) for inheritance tax (IHT) purposes. This means if the donor survives seven years, there is no charge to IHT on the donor's death. Gifts up to a total of £3,000 per annum are also exempt. There are also exemptions for gifts in consideration of marriage ( amount depends on relationship between donor and donee). A useful exemption for wealthy donors is "normal expenditure out of income".

Gifts with reservation of benefit (GROB's) are more difficult, you will need to read up on this on the HMRC website.

A gift of cash has no implications for capital gains tax.

A loan has no IHT implications unless it is forgiven. Any interest on the loan will be taxable on the recipient in the normal way.

Just worth making sure that if Uncle Jack gives you £50k, it comes out of income that has been declared for tax purposes.

Finally given anticipated further fall in house prices, are relatives aware that they are likely to lose some if not all monies loaned.

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Not knowing full details, I can only give an outline answer. Also it is some years since i did a lot of tax, so may be a bit out of date. Tax law changes very rapidly. Seek professional advice, but the following is food for thought..

An outright gift is an potentially exempt transfer(PET) for inheritance tax (IHT) purposes. This means if the donor survives seven years, there is no charge to IHT on the donor's death. Gifts up to a total of £3,000 per annum are also exempt. There are also exemptions for gifts in consideration of marriage ( amount depends on relationship between donor and donee). A useful exemption for wealthy donors is "normal expenditure out of income".

Gifts with reservation of benefit (GROB's) are more difficult, you will need to read up on this on the HMRC website.

A gift of cash has no implications for capital gains tax.

A loan has no IHT implications unless it is forgiven. Any interest on the loan will be taxable on the recipient in the normal way.

Just worth making sure that if Uncle Jack gives you £50k, it comes out of income that has been declared for tax purposes.

Finally given anticipated further fall in house prices, are relatives aware that they are likely to lose some if not all monies loaned.

hi roger

it's the other way round, we could be providing the funds for a relative looking to buy their first home.

I had no interest in discussing their timing/research of purchase, you know how it can be with families. But we're in a position where they need our help with some of the funding and we could be looking at stumping up over 10k potentially. We've no interest in having a stake in the property so i guess that makes it a loan, but then does it make things more complicated if it's a gift vs a loan ?

i'm thinking more the tax implications for us, if the funds are coming out of our savings account.

if i need to seek professional advice, who are the best people to talk to. could you also expand a bit more on this....

Just worth making sure that if Uncle Jack gives you £50k, it comes out of income that has been declared for tax purposes.

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