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Secured Loans > International families to pay more tax on ‘The Bank of Mum and Dad’

International families to pay more tax on ‘The Bank of Mum and Dad’

13th January 2017 | Published by Evolution Money

When George Osborne announced in July last year that he was planning to impose a much higher tax rate on the properties of wealthy non-doms living and working in the UK, many people said it was about time that the strange loophole was sewn shut.

Now an almost identical tax is being rolled out to international parents who plan on sending their UK-based children a loan to buy their first house. These loans will now effectively be subject to inheritance tax, just as a direct investment in the property would be.

The new legislation is likely to affect thousands of international parents, and is expected to discourage them from funding purchases of property on British soil. And it’s not only parents who are subject to the new rules – the imposition has no limit of guarantors and will also cover other family members, trusts and companies.

Bank of mum and dad

The difference between ‘loans’ and ‘gifts’

The reason a parent may choose to send a high-value loan rather than a gift is simple: security and culpability. With a gift, the child has unlimited access to the funds and may spend them however they like, with no expectation that they will ever have to return the money.

Sure, a parent is able to pass their son or daughter a cheque for £20,000 towards their new house, but without legally documenting the payment as a loan, the child is technically free to do with the money what they wish – which is an understandingly worrying prospect for parents.

Category: Homepage, Money
This post was written by Evolution Money
Warning: Late payment can cause you serious money problems. For help, go to moneyhelper.org.uk
Representative 28.96% APRC (Variable) - For a typical loan of £20,950 over 85 months with a variable interest rate of 23.00% per annum, your monthly repayments would be £537.44. Including a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00, the total amount repayable is £45,682.15. Annual Interest Rates ranging from 11.7% to 46.5% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.

Think carefully before securing debts against your home your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
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