Giving your child a house deposit
What the lender will ask you for, how a gift is treated for inheritance tax, and the questions to settle about your own retirement before the money goes.
What the lender will ask you for, how a gift is treated for inheritance tax, and the questions to settle about your own retirement before the money goes.
If you are giving your child money towards a deposit, their lender will want to know about it. Each lender sets its own rules, and you can expect to be asked for the following.
If you expect any of the money back, or want a share in the home, tell your child's broker before the application goes in. A loan or a share in the property is treated differently from a gift, and the lender needs to know.
A gift to your child is a potentially exempt transfer. If you live for seven years after making it, it falls outside your estate for inheritance tax. If you die within seven years, the gift is counted as part of your estate.
Tax is only due on a gift if the gifts you made in the seven years before death add up to more than the nil-rate band. Where tax is due on a gift made between three and seven years before death, taper relief reduces it.
Each person can give away £3,000 a year, and carry forward one unused year.
A parent can give £5,000 to a child getting married or entering a civil partnership.
Gifts of up to £250 to any one person in a tax year, provided they have not received another exempt gift from you.
Regular gifts made from your income, which leave your standard of living unchanged, can be exempt if they meet the conditions.
Inheritance tax rules and allowances can change. Check the current position before you rely on any of them.
Money given away now is money you will not have later. If you are in your fifties or sixties, a deposit may come out of savings meant to support you for twenty years or more.
Before the money goes, think through what you will live on in retirement, what you would do if you needed care, and whether you could manage a shock such as a period of illness without that money. A smaller gift, a gift spread over several years, or a loan may suit you better. Those are decisions about your own finances, and a financial planner can help you test them.
How you raise the money has its own consequences.
Check what you will have left for emergencies.
Selling investments held outside an ISA or pension may mean a capital gains tax bill.
Taking money from a pension is permanent, may be taxable above the tax-free part, and reduces your retirement income.
Borrowing against your home to fund a gift is a later-life lending decision and affects what you leave.
A gift is the simplest route for a lender. Some families consider a loan, which keeps the money in the parents' estate and can be repaid, though not every lender will accept one. Others consider a parent joining the mortgage without owning the home, which adds the parent's income to the application and makes the parent responsible for the whole debt.
Owning part of the home yourself can bring a higher rate of stamp duty land tax if you already own a home. Each route has consequences for the lending, your tax and your estate.
No tax is due at the time of a gift to a child. The question is whether it is counted in your estate if you die within seven years.
Your child does not pay income tax on a gift from you.
Yes. The annual exemption applies to each person.
Taking money from a pension is a separate decision with its own tax rules. Take advice before you draw it.
Your child's mortgage broker can tell you what their lender needs from you, and whether a gift, a loan or another arrangement suits the lending.
Whether the gift is affordable for you, where it should come from and how it affects your estate are questions for a regulated financial planner. Ask the broker to introduce you to one before the money moves.
This article explains how things work. It does not take your circumstances into account. Your mortgage broker can introduce you to a regulated financial planner at Equity & General where the question needs one.
How a Lifetime ISA works when you buy, the timing and price rules that can catch you out, and what happens to the account after you move in.
Read it
A joint borrower sole proprietor mortgage adds your income to your child's application. What it makes you responsible for, how it affects your own plans, and what to ask before you sign.
Read it
From 6 April 2027 most pensions left on death count towards the estate for inheritance tax. What changes, what stays the same, and how it touches decisions about your mortgage.
Read it