Family Loans.

BennyC

BennyC

BennyC

Soldato
Joined
25 Sep 2006
Posts
14,458
Hi guys,

My brother is in the position where he is willing to loan me the money that I would have been taking out for a mortgage on my first property.

On paper as interest free loan there would be no tax implications just capital repayments. What I then plan to do after this has been re-paid is gift him the total amount of interest he would have received (if it were taken out as a mortgage from him to me) at the rate we agreed at the start of the loan.

Has any body done something similar? borrowed money from a relative or friend and after repaying the amount in full 'gifted' them a 'fee' for example?

As far as I'm aware this is all above board.

Thanks

BennyC
 
It doesn't matter who the money is off... If you have the deposit as far as a mortgage is concerned aslong as you pay your brother and you don't fall out with him.

Where abouts are you thinking of buying? Is your brother asking for a % extra back for borrowing you the money? .... urm.
 
Last edited:
Why on earth are you complicating thing.

Borrow the money, pay it back then give him a drink.
 
iDroid84 said:
It doesn't matter who the money is off... If you have the deposit as far as a mortgage is concerned aslong as you pay your brother and you don't fall out with him.
Click to expand...

The loan from him would be replacing my need for a mortgage in effect making me a cash buyer. Not that this is essential it's the cheaper interest rate and the flexibility to over pay as much as I like or have as many grace periods as necessary should I find myself a little tight for money due to any unexpected bills etc.

Edit: Yes, he wants a % return, seeing as it will take me between 4 and 7 years to repay this money this is 4 to 7 years it's depreciating due to lack of interest. It's my way of saying thank you and I don't think him wanting to make a return on his money is unreasonable.

DiamondMark said:
Why on earth are you complicating thing.

Borrow the money, pay it back then give him a drink.
Click to expand...

It's not complicated at all? Repaying him the capital and then gifting him the interest. :confused:
 
BennyC said:
It's not complicated at all? Repaying him the capital and then gifting him the interest. :confused:
Click to expand...

Where does the "gifting" come in, are you actually going to bother declaring any of this?
 
DiamondMark said:
Where does the "gifting" come in, are you actually going to bother declaring any of this?
Click to expand...

Afaik, you can gift up to £3000 to family per year tax free. As my grandmother did this for a few years before she died.

[TW]Fox;18553277 said:
I would imagine it's a significant enough sum that he cannot get away with not declaring it.
Click to expand...

The sum of the loan would be between £30-40,000.
 
BennyC said:
Afaik, you can gift up to £3000 to family per year tax free. As my grandmother did this for a few years before she died.



The sum of the loan would be between £30-40,000.
Click to expand...

Then why are you bothering to tell anyone?

Seriously if you cant lose 40k seek some advice from someone who can.
 
Transferring cash is fine - the only tax implication would be if your brother was to die within 7 years of giving you the money. It would then form part of his death estate and become potentially liable to Inheritance Tax.
 
NickXX said:
Transferring cash is fine - the only tax implication would be if your brother was to die within 7 years of giving you the money. It would then form part of his death estate and become potentially liable to Inheritance Tax.
Click to expand...

I think the issue is more that there will be interest paid back to the brother and he wants to avoid any tax implications for either of them on that, rather than receiving the initial sum.
 
InvaderGIR said:
I think the issue is more that there will be interest paid back to the brother and he wants to avoid any tax implications for either of them on that, rather than receiving the initial sum.
Click to expand...

Yep. There would be nothing documented that this gift was any form of interest. Just that it was a generous gift from me to him.

He's not entirely sure if he does yet want to lend me the sum I need. So I'm just seeing what our options are. I have a mortgage agreement in principle just a family loan would be slightly cheaper and flexible and he makes some cash out of it.
 
BennyC said:
What are you on about 'loosing' money?

Quite frankly if you're not going to help then I'd rather you take your attitude elsewhere.
Click to expand...

Sorry i spoke.

I got to ask, where is the problem here, i wrote my mother in law a cheque for 100k to buy her council house, i didnt want any interest.

I wrote my daughter a cheque for 250k to buy her flat obviously no interest.

Lets say i wanted interest, then they give me a drink after, where is your problem?

For the life of me i dont see where this gift **** you keep on about is.

Anyway my bad for offering up an opinion and you crack on doing what you feel best.
 
Last edited:
DiamondMark said:
Sorry i spoke.

I got to ask, where is the problem here, i wrote my mother in law a cheque for 100k to buy her council house, i didnt want any interest.

I wrote my daughter a cheque for 250k to buy her flat obviously no interest.

Lets say i wanted interest, then they give me a drink after, where is your problem?

For the life of me i dont see where this gift **** you keep on about is.

Anyway my bad, for offering up an opinion and you crack on doing what you feel best.
Click to expand...

Say for example the term in which it takes for me to repay my mortgage accrued £4,000 of interest. This is what I would then gift him. As giving it to him would no longer be a capital repayment it would be classed unearned income and subject to tax.

Whether or not you choose to do things by the book is up to you.

He doesn't want to loose out on the interest he would make on that money over 6 or 7 years which isn't unreasonable. Seeing as you were giving your money away it's a little bit of a different situation.
 
Last edited:
Wow, I never knew you had to declare money you give to family members. You should be able to do whatever you want with money you have earned and paid tax on :mad:
 
I think a lot of you are being confused by Benny's terminology.

He wants to borrow a stack of money from his brother then pay it back with interest. He doesn't however want to call it interest as he's worried about tax implications so he's calling it a "gift".

We could rephrase the question, how can I borrow money from my brother and repay him with interest without either of us incurring any kind of tax liabilities?

Is that correct Benny?
 
Last edited:
You must log in or register to reply here.
Back
Top Bottom