Loan to Daughter?
Discussion
Could I loan approx 40K to my daughter for her to clear her Uni loans which she services at 7.9%?
.......the idea would be a loan with an agreed repayment schedule and an agreement (if thats a requirement to satisfy HMRC rules etc).
Want to do it properly and within the rules...
Many thanks
Paul
.......the idea would be a loan with an agreed repayment schedule and an agreement (if thats a requirement to satisfy HMRC rules etc).
Want to do it properly and within the rules...
Many thanks
Paul
pauljdh said:
Could I loan approx 40K to my daughter for her to clear her Uni loans which she services at 7.9%?
.......the idea would be a loan with an agreed repayment schedule and an agreement (if thats a requirement to satisfy HMRC rules etc).
Want to do it properly and within the rules...
Many thanks
Paul
No rules - unless you charge her interest. If you do, you should notify HMRC that you are receiving interest as interest is taxable........the idea would be a loan with an agreed repayment schedule and an agreement (if thats a requirement to satisfy HMRC rules etc).
Want to do it properly and within the rules...
Many thanks
Paul
C69 said:
Are you concerned about the seven-year rule for inheritance tax?
If so, what you're suggesting seems to be a reasonable way of establishing that it's a loan, not a gift. Obviously she'd have to actually pay the repayments when they become due...
By calling it a loan wouldn't the full outstanding amount be included in the Estate for IHT calculations, whereas if it's a gift the OP would get some amount of taper relief?If so, what you're suggesting seems to be a reasonable way of establishing that it's a loan, not a gift. Obviously she'd have to actually pay the repayments when they become due...
Countdown said:
By calling it a loan wouldn't the full outstanding amount be included in the Estate for IHT calculations, whereas if it's a gift the OP would get some amount of taper relief?
Agreed, making it a loan might not necessarily the best approach from an IHT perspective. I suppose it depends on the OP's circumstances and what they're trying to achieve.Edited by C69 on Sunday 5th January 23:32
Interest has no bearing on whether the money was in the way of a loan or a gift. There is no obligation to charge interest on a loan, if you don't want to. And, as I said previouisly, if you start receiving interest, you must declare the interest for tax purpose - usually through self assessment.
What determines whether something is a gift or a loan are the terms and conditions associated with the transaction - and subsequent events.
For instance - if you say "here's £40,000 - yoiu don't need to pay it back" - that's a gift.
If you say, "here's £40,000 - you need to pay it back as soon as you can" - that's a loan.
Sometimes, an intended loan morphs into a gift as the lender changes their mind about being repaid.
With gifts the main concern is Inheritance Tax (IHT). You can give as much as you like with no IHT consequences - provided you don't die within 7 years of the date of the gift.
What determines whether something is a gift or a loan are the terms and conditions associated with the transaction - and subsequent events.
For instance - if you say "here's £40,000 - yoiu don't need to pay it back" - that's a gift.
If you say, "here's £40,000 - you need to pay it back as soon as you can" - that's a loan.
Sometimes, an intended loan morphs into a gift as the lender changes their mind about being repaid.
With gifts the main concern is Inheritance Tax (IHT). You can give as much as you like with no IHT consequences - provided you don't die within 7 years of the date of the gift.
Write a "promisory note". Both of you sign it. Lay out the terms of what you're proposing to do. We leat the kids money to buy a home but it's not money I can afford to be without. Our note said it was interest free for X years and then an interest rate of Y afterwards. They pay back into my bank and I keep an excel sheet with the numbers.
We've let them off with the interest payments so far as (mentioned above) it means declaring to HMRC.
https://en.wikipedia.org/wiki/Promissory_note
We've let them off with the interest payments so far as (mentioned above) it means declaring to HMRC.
https://en.wikipedia.org/wiki/Promissory_note
Eric Mc said:
With gifts the main concern is Inheritance Tax (IHT). You can give as much as you like with no IHT consequences - provided you don't die within 7 years of the date of the gift.
Isn’t the main IHT consideration the possibility of a gift being subject to IHT (if the giver dies within 7 years) vs the certainty of the money still being in the estate for IHT calculation purposes if it’s a loan?LooneyTunes said:
Eric Mc said:
With gifts the main concern is Inheritance Tax (IHT). You can give as much as you like with no IHT consequences - provided you don't die within 7 years of the date of the gift.
Isn’t the main IHT consideration the possibility of a gift being subject to IHT (if the giver dies within 7 years) vs the certainty of the money still being in the estate for IHT calculation purposes if it’s a loan?Mr Whippy said:
Can’t you get best of boast worlds there?
Loan it with repayment due at your death?
Assuming daughter is on your will it’s circular and can just come off the amount of residual of estate value?
Assuming estate is in balance to do that… could get messier if not.
Surely that would be the worst of all worlds? Loan it with repayment due at your death?
Assuming daughter is on your will it’s circular and can just come off the amount of residual of estate value?
Assuming estate is in balance to do that… could get messier if not.
Why would he want to put it back in the estate at death in order to then pay IHT that, assuming he lived 7 years, would have been avoided?
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