Giving a family member cash, is it taxable?

[98elise]

My mother is retired, and has a few isa's and bonds. Some of the bonds are finishing soon so she's going to get a crap return with any new product.

I have an offset mortgage account, so she could loan me the cash to put in the offset, and I pay her the interest I save, which would be about 4%.

Is this an income for tax purposes, or can it be gifted to her tax free?

Also is there anything we should do to make sure the cash is always legally hers? At the moment I've proposed sending my brothers a signed statement that she has lent me x and it is repayable at 30 days notice.

[pacoryan]

I suspect you already know the answer to this, should HMRC decide to take a look they will see a loan and interest paid in return, whether you call it a gift or not. You certainly won't get a tax professional on here recommending this course of action!

[Eric Mc]

If a person received interest income from ANY source, it is taxable income in their hands and should be returned to HMRC.

[98elise]

Fair enough I honestly didn't know if it was taxable as I know you can gift money to certain people. Obviously I don't pay tax on the money as its a reduction in my interest payment via offset.

I'll let her know she needs to declare it. Its not a huge amount, around £100 pcm.

[megaphone]

98elise said:

Fair enough I honestly didn't know if it was taxable as I know you can gift money to certain people. Obviously I don't pay tax on the money as its a reduction in my interest payment via offset.

I'll let her know she needs to declare it. Its not a huge amount, around £100 pcm.

Why don't you just gift her the £100/m? You can gift money to whoever you like.

[pacoryan]

megaphone said:

98elise said:

Fair enough I honestly didn't know if it was taxable as I know you can gift money to certain people. Obviously I don't pay tax on the money as its a reduction in my interest payment via offset.

I'll let her know she needs to declare it. Its not a huge amount, around £100 pcm.

Why don't you just gift her the £100/m? You can gift money to whoever you like.

OP is intending to gift interest. If it is interest, it isn't a gift. The language is very important.

[Simpo Two]

pacoryan said:

OP is intending to gift interest. If it is interest, it isn't a gift. The language is very important.

Though if the interest is taxed at source, as most is, then it arrives tax paid and therefore no reason why it can't be gifted, no?

[98elise]

Simpo Two said:

pacoryan said:

OP is intending to gift interest. If it is interest, it isn't a gift. The language is very important.

Though if the interest is taxed at source, as most is, then it arrives tax paid and therefore no reason why it can't be gifted, no?

To be clear its a saving I make on the monthly interest I pay to my building society (as its an offset account). The money saved has of course already been subject to income tax. The difference is that my mother is lending me the money which is making that saving, in return getting that £100 saving.

In my ignorance I assumed that because I'm not receiving any interest (only paying less to my mortgage company) that I could then gift the £100 each month.

[Simpo Two]

coyft said:

If you choose to gift your mother £100 per month then that's purely a private mater between the two of you and won't be subject to tax.

My thoughts too. Of every (say) £1,000 in a bank account you can't say 'This £1 came from X and this £1 came from Y'; you can still gift c.£3Kpa tax free if you want. If there is any tax liability on anything just pay it.

[gumshoe]

You are not EARNING interest, you are avoiding paying interest. The fact that your mother is lending you money to do so is not the important bit. What's important is if she expects the loan to be interest bearing. And if that's written into the contract, she's earning interest on the loan, so be careful.

You should easily be able to construct the arrangement such that any payments to your mother are not interest payments, are not uniform in their regularity and amount. HMRC are quite fair and sensible so long as you're able to demonstrate satisfactorily. They'll deemed to be a gift, and there will be no further tax to pay it on from your mother's perspective.

ps you can gift any amount of cash you like, not just 3k. The 3k per year is the cash amount exempt from being a PET, which all other gifts and transfers are until the 7 years has passed.

[Paul Dishman]

gumshoe said:

You are not EARNING interest, you are avoiding paying interest. The fact that your mother is lending you money to do so is not the important bit. What's important is if she expects the loan to be interest bearing. And if that's written into the contract, she's earning interest on the loan, so be careful.

You should easily be able to construct the arrangement such that any payments to your mother are not interest payments, are not uniform in their regularity and amount. HMRC are quite fair and sensible so long as you're able to demonstrate satisfactorily. They'll deemed to be a gift, and there will be no further tax to pay it on from your mother's perspective.

ps you can gift any amount of cash you like, not just 3k. The 3k per year is the cash amount exempt from being a PET, which all other gifts and transfers are until the 7 years has passed.

Or you say that the £100 per month is repayment of capital.

[98elise]

Paul Dishman said:

gumshoe said:

You are not EARNING interest, you are avoiding paying interest. The fact that your mother is lending you money to do so is not the important bit. What's important is if she expects the loan to be interest bearing. And if that's written into the contract, she's earning interest on the loan, so be careful.

You should easily be able to construct the arrangement such that any payments to your mother are not interest payments, are not uniform in their regularity and amount. HMRC are quite fair and sensible so long as you're able to demonstrate satisfactorily. They'll deemed to be a gift, and there will be no further tax to pay it on from your mother's perspective.

ps you can gift any amount of cash you like, not just 3k. The 3k per year is the cash amount exempt from being a PET, which all other gifts and transfers are until the 7 years has passed.

Or you say that the £100 per month is repayment of capital.

That may well be the answer. She lends me the money to do with as I please. I pay her back £100 pcm capital with no interest. When she wants the money back I pay her the cash minus the capital repayed.

Shortly after I can gift her some additional money which has nothing to do with the tansaction above.

[Countdown]

98elise said:

My mother is retired, and has a few isa's and bonds. Some of the bonds are finishing soon so she's going to get a crap return with any new product.

I have an offset mortgage account, so she could loan me the cash to put in the offset, and I pay her the interest I save, which would be about 4%.

Is this an income for tax purposes, or can it be gifted to her tax free?

Also is there anything we should do to make sure the cash is always legally hers? At the moment I've proposed sending my brothers a signed statement that she has lent me x and it is repayable at 30 days notice.

Technically any money you give your mum in respect of interest on loans is taxable.

In practice there are many ways of it becoming non-taxable. And (unless your mum is money-laundering) I sincerely doubt
HMRC would be interested. It would be nigh on impossible to prove if both you and your mum denied that there was a commercial agreement.