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Offer to pay off Mortgage
5 Answers
An older member of our family has offered to pay off a substantial amount of our mortgage, the outstanding balance some �230000.
I realise this gift is subject to Inheritence Tax should they pass away within 7 years, but are we also subject to capital gains? What other forms of taxation are we subject to and can we alleviate the tax by receiving the money in stages?
Any help would be greatly appreciated.
I realise this gift is subject to Inheritence Tax should they pass away within 7 years, but are we also subject to capital gains? What other forms of taxation are we subject to and can we alleviate the tax by receiving the money in stages?
Any help would be greatly appreciated.
Answers
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Apart from the possible inheritance tax, there's nothing to worry about. As long as the house is your main home, Capital Gains Tax does not apply:
http://www.direct.gov.uk/en/MoneyTaxAndBenefit s/Taxes/TaxOnPropertyAndRentalIncome/DG_401633 7
Gifts are not taxable (except when IHT applies). If someone wishes to give you �230,000, they're free to do so, without any financial penalties to either them or you. If you then choose to use that money to pay off your mortgage, you'll then be using your own money, so the situation is just the same as if the money came from your savings.
Chris
PS: When you, or the relative pays the mortgage off, remember to keep the receipt. I received a 'notice of intent to repossess' several months after I'd paid off my mortgage, because the Woolwich had managed to 'lose' my payment of over �35,000! Thankfully, I'd still got the receipt, so I managed to get things sorted out very easily.
http://www.direct.gov.uk/en/MoneyTaxAndBenefit s/Taxes/TaxOnPropertyAndRentalIncome/DG_401633 7
Gifts are not taxable (except when IHT applies). If someone wishes to give you �230,000, they're free to do so, without any financial penalties to either them or you. If you then choose to use that money to pay off your mortgage, you'll then be using your own money, so the situation is just the same as if the money came from your savings.
Chris
PS: When you, or the relative pays the mortgage off, remember to keep the receipt. I received a 'notice of intent to repossess' several months after I'd paid off my mortgage, because the Woolwich had managed to 'lose' my payment of over �35,000! Thankfully, I'd still got the receipt, so I managed to get things sorted out very easily.
for such a substantial amount, have you considered an offset mortgage account? You'll greatly reduce the term, and at the end you'll have a tidy sum still in the bank and available to you. If you hand it over to the mortgage account holder and then decide to take a further advance at some time in the future, it would be at the prevailing interest rate.
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