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TonyTax
TonyTax, Tax Consultant
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My mother was living in my home and I borrowed £50k from her

Resolved Question:

My mother was living in my home and I borrowed £50k from her in 2013.
When I moved home 9 months ago, I paid back £23,500 and my mother was happy to write off the remainder (£26,500). So the original loan was destroyed in February 2016. My mother then died unexpectedly in March. We are currently completing the Probate forms and this amount is declared on the Inland Revenue form by the solicitor.
However, how do I put this amount onto individual tax return at the end of the FY 16/17 and what tax will I have to pay on this amount?
Submitted: 11 months ago.
Category: Tax
Expert:  TonyTax replied 11 months ago.

Hi.

The reason that the £26,500 is being included in the probate forms is because that part of the original loan which was forgiven by your late mother became a gift within seven years of her death. Unless your mother made gifts in excess of the nil-rate band for IHT of £325,000 (or up to £650,000 if she was a widow and her late husband did not fully utilise his nil-rate band) in the seven years before her death, your gift will escape IHT as the nil-rate band is first used against gifts made in the seven years before death.

As far as your personal tax situation is concerned, you don't need to disclose the gift in your tax return as it isn't taxable on you.

I hope this helps but let me know if you have any further questions.

Customer: replied 11 months ago.
Thanks you Tony. I was under the impression that I would have to pay 20% income tax on it via my self assessment. So just to confirm that I do not have to disclose it on my Self Assessment Form - at all in 2016/17?
Expert:  TonyTax replied 11 months ago.

No, you don't.

Customer: replied 11 months ago.
Thank you.
Expert:  TonyTax replied 11 months ago.

Thanks.

Would you mind rating my answer before you leave the site please.

Expert:  TonyTax replied 10 months ago.

Hi again.

I'm just following up to find out if my answer helped or if you have any further questions.

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