House deposit

Reginald

Reginald

Reginald

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Joined
24 Aug 2008
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1,318
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London
Hey hey,

Looking to a buy a house (perhaps a shed given house prices) in a few months. Given the hefty sum needed for a deposit nowadays, my parents have kindly agreed to help.

Has anyone been in a similar situation before and do you know of any tax implications surrounding this?

Cheers :)
 
Thanks for that..there's another link at the bottom that relates to gifts..

http://www.inheritance-tax-planning.com/inheritance-tax-gifts.php

Here it says that you can give up to 3k a year tax free as a gift... I'm not sure what this would be classed as and if they could get away with giving me a sum over this amount tax free?

Is there anything stopping me being made a joint holder of their bank account so the money isnt being transferred?

Cheers
 
You are correct, 3k per parent per year before tax is considered. My parents did something similar except they bought my property outright. To avoid any tax implications, they had a legal document drawn up by solicitors outlining in essence a mortgage. I repay my parents a set amount each month, however I don't have to pay interest :)

This is completely legal and evades any tax implications. You could have something similar setup and in essence your parents are then giving you a loan.
 
My parents did this for us - speak to your solicitor, and make sure your mortgage company are aware, it will change the terms (having to be checked for money laundering etc) but basically you just need to have something in place that says the money is gifted, and that your parents don't expect a financial proportion of the property.
 
Depending on how large the deposit is they're going to give you I'd be tempted to keep my mouth shut about it with the bank, don't give them an excuse to stiff you over anything. You have the money, the chances of your folks both dying in the next 7 years is slim and if they did the odds are you'd get inheritance or be in a position to pay off the tax that would be imposed anyway. We're not talking about millions of pounds here. I've never had a bank ask me where I got my deposit from, other than to ask if it's my money, which if it's gifted it is.
 
goldilocks said:
My parents did this for us - speak to your solicitor, and make sure your mortgage company are aware, it will change the terms (having to be checked for money laundering etc) but basically you just need to have something in place that says the money is gifted, and that your parents don't expect a financial proportion of the property.
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Yup, just been through this - parents had to sign a gift form. It made absolutely no difference otherwise; they don't care where the money comes from really - this is protection that other parties don't own the property should it come to repossession or similar.
 
Anything over £3,000 (plus an additional £250 as there's two of you) is a potentially exempt transfer (PET) and could be liable to inheritance tax for the next 7 years (in 99% of cases).

If both parents are still with you, you can do 2 x £3,000. And they can also use last year's gift allowance too, so 2 x 2 x £3,000. £12,000 free of IHT - job done.
 
Reginald said:
Hey hey,

Looking to a buy a house (perhaps a shed given house prices) in a few months. Given the hefty sum needed for a deposit nowadays, my parents have kindly agreed to help.
Click to expand...
Although I can't help advise you of the tax implications of accepting parental assistance for buying a house, I can from personal experience advise you of the implications of buying a house.

I would personally advise against buying a house right now. Anecdotally, there is evidence that the ever increasing high house prices are unsustainable, especially given the current economic climate – increasing levels of unemployment, wage cuts/freezes, and high inflation rates which result in increased living costs.

The dip in house prices we saw in 2008/2009 was only halted due to quantative easing and special liquidity schemes introduced and run by the government/Bank of England, coupled with record low interest rates, to minimise mortgage repayments for those who were on tracker/standard variable rate mortgages.

Add to this that despite the Bank of England base rate being set at a record of only 0.5%, the best mortgage rates being offered to first time buyers with a 10% deposit is currently 5.45%. With inflation currently running out of control, the base rate will have to increase in the long term, which will then impact consumer mortgage rates.

It is highly likely that we are about to see a major change in economic policy, which combined with the problems which still exist within the banking sector, will result in increased taxation and less available credit and a negative impact on house prices.

The whole house price boom over the past 10 years was a big con, overseen by the labour government (by removing house prices from the retail price index and deregulating the credit industry), and devised in order to generate economic growth in order to fund government spending.

The most tragic thing of all, is that it is first time buyers who stand to lose the most. People who purchased in the early 2000’s will have seen the perceived value of their houses increase by a factor of 2.5x there original values, and will not be affected as badly by falling prices and negative equity.

The housing market is still very over hyped. Personally, if I was you, I’d wait 12-18 months to see how the changes to economic policy brought in by the conservatives affect house prices.

The new housing minister seems very keen on the concept of home ownership (unlike his labour predecessor, who believed renting was the way forward). I personally feel that home affordability will increase over the next few years, and it will be possible to buy a modest home without being overleveraged with debt.
 
HaX said:
Although I can't help advise you of the tax implications of accepting parental assistance for buying a house, I can from personal experience advise you of the implications of buying a house.

I would personally advise against buying a house right now. Anecdotally, there is evidence that the ever increasing high house prices are unsustainable, especially given the current economic climate – increasing levels of unemployment, wage cuts/freezes, and high inflation rates which result in increased living costs.

The dip in house prices we saw in 2008/2009 was only halted due to quantative easing and special liquidity schemes introduced and run by the government/Bank of England, coupled with record low interest rates, to minimise mortgage repayments for those who were on tracker/standard variable rate mortgages.

Add to this that despite the Bank of England base rate being set at a record of only 0.5%, the best mortgage rates being offered to first time buyers with a 10% deposit is currently 5.45%. With inflation currently running out of control, the base rate will have to increase in the long term, which will then impact consumer mortgage rates.

It is highly likely that we are about to see a major change in economic policy, which combined with the problems which still exist within the banking sector, will result in increased taxation and less available credit and a negative impact on house prices.

The whole house price boom over the past 10 years was a big con, overseen by the labour government (by removing house prices from the retail price index and deregulating the credit industry), and devised in order to generate economic growth in order to fund government spending.

The most tragic thing of all, is that it is first time buyers who stand to lose the most. People who purchased in the early 2000’s will have seen the perceived value of their houses increase by a factor of 2.5x there original values, and will not be affected as badly by falling prices and negative equity.

The housing market is still very over hyped. Personally, if I was you, I’d wait 12-18 months to see how the changes to economic policy brought in by the conservatives affect house prices.

The new housing minister seems very keen on the concept of home ownership (unlike his labour predecessor, who believed renting was the way forward). I personally feel that home affordability will increase over the next few years, and it will be possible to buy a modest home without being overleveraged with debt.
Click to expand...

Amen. I'm trying to convince the Mrs that we should sell our place and rent for a while.
 
Problem with home owner ship, is the costs and the return you get for your money, its not much unless you have a huge deposit, low depoist with rising living costs in terms of food, petrol and energy, its a dodgy time for people that what to enjoy life and have a home.
 
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