Buying a first home is expensive and on average first time buyers need to save for 13 years for a deposit. More and more “the bank of mum and dad” is helping them get on the property ladder.
If you make a gift of the money out of your personal savings, then as long as you survive for the next seven years, there are no tax implications regardless of the amount or value of your own estate.
Alternatively, you could make a gift of some shares in your company, so that dividends go straight to your children. The first £2,000 will be tax-free under the dividend allowance, and most likely the remainder taxed at 7.5%.
Although you’re making a gift, it’s still classed as a market value sale for Capital Gains Tax purposes. It’s therefore important that both you and your child sign a form to ‘hold over’ any gain. In essence, this means that you won’t pay any tax on the gift, and your child will pay the tax later if they ever sell the shares.
First-time buyers don’t have to pay stamp duty on the first £300,000 of the purchase price and pay 5% between £300,001 and £500,000. In the past, if parents funded the deposit they tended to own a share of their child’s property. However, if you do this now, you’re not a first time buyer so stamp duty would become payable on the property. Many people unwittingly fall foul of this expensive mistake.