Monday, July 22, 2024
HomeFinanceAfter his children's mortgage bills skyrocketed, the father was cautioned about inheritance...

After his children’s mortgage bills skyrocketed, the father was cautioned about inheritance tax regulations.

An expert has explained what people should be aware of as a result of the rising base rate. As a result, many people are turning to their parents because they are concerned about not being able to afford rising bills.

What people ought to be aware of has been explained by an expert.

Keith sent an email to BBC Money Box because he was concerned about the rising mortgage payments for his children.

He wants to use the money from selling his house to help his two children, who face significant monthly increases.

Sarah Coles, head of personal finance at Hargreaves Lansdown, talked about the rules for gifts and what they might mean for Keith.

dies leaving an estate worth more than £325,000 (Credit: GETTY) After his children’s mortgage costs soar, a dad is urged to be careful about inheritance tax rules. Britons have been warned about the potential inheritance tax repercussions of paying for their adult children’s mortgages.

An expert has explained what people should be aware of as a result of the rising base rate. As a result, many people are turning to their parents because they are concerned about not being able to afford rising bills.

What people ought to be aware of has been explained by an expert.

Keith sent an email to BBC Money Box because he was concerned about the rising mortgage payments for his children.

He wants to use the money from selling his house to help his two children, who face significant monthly increases.

Sarah Coles, head of personal finance at Hargreaves Lansdown, talked about the rules for gifts and what they might mean for Keith.

Each year, Ms. Coles warned people about the gifting allowances. Gifts are tax-free up to a certain amount each year.

This totals £3,000. However, individuals can contribute a total of £6,000 by using their allowance from the previous year.

Ms. Coles stated: It becomes a Potential Exempt Transfer (PET) if you give more than that.

“For the next seven years, this means; It is still regarded as yours.

So, if you live seven years, it goes out of your estate and you don’t have to worry about inheritance taxes.

But if you passed away during that time, at least a portion of that cash would be returned to your estate, and you might have to pay inheritance tax on it.
“It’s important to know how much you need in your estate to be subject to IHT.

“It’s definitely worth having a look at the sums and seeing if it would be an issue for you.” “In some cases, you can be fined £1 million and not fall foul at all.”

With the average two-year fixed rate mortgage now exceeding 6% and the UK’s interest rates rising to their highest level since 2008, many people will turn to their parents for financial assistance.

According to the Saltus Wealth Index, 79% of parents are now helping their adult children pay for everyday expenses, with one in four of those helping with mortgage payments specifically.

The average repayment on a 25-year £200,000 mortgage increased by £383.50 in just two years as a result of the average rate for a two-year fixed deal surpassing 6% this month.

That amounts to an additional cost of £9,204 over the course of two years; As a result, more and more families are relying on their parents for assistance as they struggle to cover that additional expense.

Ms. Coles urged parents to be aware of the inheritance tax implications of yearly gifts of large sums of money.

Anything above the standard nil-rate band, which is £325,000 per individual, is subject to inheritance tax at 40%.

People might think about giving gifts before they die if the residence nil rate band won’t cover their estate.