With rising house prices and an increased cost of living, statistics show that more young people are reaching out to their parents for a deposit to purchase a property. While getting a foot on the property ladder is historically viewed as one of the soundest investments a person can make, where they source the funding for such an objective is a matter of concern. Experts are now warning those borrowing from their mother and father that such a move could lead to them facing a sizeable tax bill in the future.
The increase in property value in the UK has already seen the worth of many people’s estates rise dramatically, pushing them past the nil band rate and making an inheritance tax (IHT) payment necessary. However, inheritance tax is also payable on gifts if an individual dies within seven years of giving.
Recent research shows that 14 per cent of homeowners surveyed had assisted their issue to become first-time buyers with a further 19 per cent stating their intention to do so.
While it is natural for parents and grandparents to wish to help younger family members make a strong start with financial assistance, they can do more harm than good when gifts are given without consideration for tax implications further down the line.
Fortunately, financial planning services in Chester can help consumers avoid the pitfall of inheritance tax. Wealth managers combine tax effective strategies that allow grandparents and parents to help beneficiaries while they are alive, while simultaneously mitigating the size of the final IHT bill they face and where possible, avoiding it entirely.