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I have £30000 that I can afford to lend my son to help with deposit on a first home, but may need it back later on.

Can I lend it to him interest free, or do I have to have a loan agreement with him in order to claim it back later on? Are there tax implications?


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You would need a loan agreement in order to claim the money back. It would be better to limit the term of the loan to, say, 5 or 10 years, so that you can reclaim it. It could then be subject to annual extension subject to mutual agreement. This applies whether, or not, there is any interest to be charged. If it is a straight loan with no interest, there is no tax involved. You don't say whether he has a partner, or might have at some stage. If so, you should consider whether the loan should continue in the event of them splitting up or your son dying and incorporate something in the loan agreement. Mike

hi Mike Thanks for your help. Can we draft a loan agreement between us or does it have to be done through a solicitor? We already have a three way will agreement between my two sons and myself, where the other two are the executors for the third in each case. Would my insistance on a loan agreement affect his mortgage offer, as they may ask me to sign an agreement to say the money is not a loan but a gift?

It is possible to draw it up between yourselves if you are familiar with that sort of thing. The mortgage provider would not be a problem if yhe loan is a personal unsecured loan. His solicitor will ask what the sources of his deposit are under Money Laundering regulations. Mike

Thanks again for your help. Very grateful.

'Let' it for the first year to get your money back?