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What is the best tax efficient way to give or loan a child a deposit for a house purchase

d4veh
by d4veh 11 August 2010  |  Comments 2 comments  |  Love Love  0 loves

I want to help my son buy his first house and he needs 32K as a deposit. The mortgage company have a problem if I have a call on the property but can it be a gift without either of us paying tax

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Comments (2)

  • SoftwareBear
    Love rating 212
    SoftwareBear posted

    I believe yes it is ok ... you own the money and it has already been taxed for you ... you can give it to your son with no tax implications for him.

    However, should you suddenly need to go into a nursing home within a reasonable period afterwards (not exactly sure how long) ... it could be required to pay your fees ... so you son might have to pay it back ... so you need some plan B should that be a possibility.

    Also if it is within 7 years of your death and your son inheriting your estate ... if it goes above the inheritance tax threshold then it might cause your estate to have to pay tax ... this would come out of your estate though ... not your sons bank.

    I suspect they are more concerned that your son hasn't saved the deposit yet he is the one with the mortgage. Otherwise you could apply jointly for the mortgage, but you would then be liable for the entire mortgage, not just your share.

    So the bank are doing you a favour really by forcing you to reduce your exposure to financial ruin at your son's hands.

    Not sure if you get a share of the property without being on the mortgage though.

    So you are kissing goodbye to 32K when you give it to your son ... are you sure ?

    Posted on 11 August 2010 | Love Love  0 loves Report
  • SmudgeButt
    Love rating 83
    SmudgeButt posted

    I would make sure you document the gift of money to him. If he is currently in a relationship or if he gets involved in the future AND then there is a split between him & his partner you probably don't want to lose what you have gifted to your son to his ex partner. It will be easier for him if there is something that states you gave HIM the money (not to the couple).

    Likewise if you have other children it may be of comfort to them if they are aware of the gift and you note it as a share of your estate so they don't feel they are being disadvantaged. You may want to note this also in your will. 

    Posted on 11 August 2010 | Love Love  0 loves Report

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