{"id":23968,"date":"2023-01-17T10:38:24","date_gmt":"2023-01-17T10:38:24","guid":{"rendered":"https:\/\/smh.group\/?p=23968"},"modified":"2023-01-17T10:38:24","modified_gmt":"2023-01-17T10:38:24","slug":"what-are-the-tax-implications-for-the-bank-of-mum-and-dad","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/what-are-the-tax-implications-for-the-bank-of-mum-and-dad\/","title":{"rendered":"What are the tax implications for the bank of mum and dad?"},"content":{"rendered":"<p><strong>With property prices expected to fall during 2023, parents may be thinking about getting their children onto the property ladder. However, although help with a deposit does not raise that many tax issues, joint ownership can have expensive tax consequences.<\/strong><\/p>\n<p>Nearly half of first-time property buyers aged under 35 have received help from the bank of mum and dad. However the following implications should be considered alongside generous intentions.<\/p>\n<h2><strong>Help with a deposit<\/strong><\/h2>\n<ul>\n<li><strong>Outright gift:<\/strong> This will be treated as a gift for inheritance tax (IHT) purposes. There is no immediate tax cost, but it could mean more IHT is payable if the parent subsequently dies within seven years.<\/li>\n<li><strong>Loan:<\/strong> An interest-free loan arrangement avoids any IHT implications, but it could impact on mortgage affordability calculations.<\/li>\n<\/ul>\n<h2><strong>Stamp duty<\/strong><\/h2>\n<p>Joint ownership is likely to mean upfront stamp duty consequences.<\/p>\n<ul>\n<li>In England and Northern Ireland, first-time buyers can benefit from a nil-rate threshold of \u00a3425,000, saving a potential \u00a38,750 compared to a normal purchaser. However, with joint ownership, all purchasers need to be first-time buyers to qualify for relief; parents are unlikely to qualify.<\/li>\n<li>There is a similar, although much lower, relief for Scottish first-time buyers.<\/li>\n<li>Furthermore, the inclusion of parents will probably mean that the stamp duty surcharge on second homes is payable. For property in England and Northern Ireland, this is 3%, with higher surcharges for Scottish and Welsh property.<\/li>\n<\/ul>\n<p>The surcharge can mean an extra cost of \u00a39,480 for a property purchase in England at the latest published average price (October 2022) of \u00a3316,000.<\/p>\n<h2><strong>Capital gains tax (CGT)<\/strong><\/h2>\n<p>CGT exemption on property disposal only applies if a property has been the seller\u2019s main residence, and this again is unlikely to be the case for a joint owning parent. The tax charge will probably be mainly, or wholly, at 28%. The future reduction of the CGT annual exemption to just \u00a33,000 will not help.<\/p>\n<p>If you are unsure what is best for your circumstances, please contact our <a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/chartered-accountants\/\"><strong><span style=\"text-decoration: underline;\">Sheffield based<\/span> Accounting &#038; Business Advisory<\/strong><\/a> on <strong>0114 266 4432<\/strong> or <a href=\"mailto:info@smh.group\"><span style=\"text-decoration: underline;\"><strong>info@smh.group<\/strong><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>With property prices expected to fall during 2023, parents may be thinking about getting their children onto the property ladder. However, although help with a deposit does not raise that many tax issues, joint ownership can have expensive tax consequences.<\/p>\n","protected":false},"author":4,"featured_media":22158,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[3],"tags":[972,69,83,19,14],"class_list":["post-23968","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh-accounting-business-advisory","tag-bank-of-mum-and-dad","tag-capital-gains-tax","tag-chartered-accountants","tag-tax","tag-tax-planning"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What are the tax implications for the bank of mum and dad? - Accountants in Sheffield - SMH Group<\/title>\n<meta name=\"description\" content=\"With property prices expected to fall during 2023, parents may be thinking about getting their children onto the property ladder. However, although help with a deposit does not raise that many tax issues, joint ownership can have expensive tax consequences.\" \/>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What are the tax implications for the bank of mum and dad? - Accountants in Sheffield - SMH Group\" \/>\n<meta property=\"og:description\" content=\"With property prices expected to fall during 2023, parents may be thinking about getting their children onto the property ladder. 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