Thanks for that, Cat. I would find it difficult to believe that if we give our children money they would then have to pay tax on it if we didn't charge interest. However when inheritance tax rules are considered I/we know that I/we have to live seven years after the gift to avoid the money coming into the equation for tax. Any other views out there?
Bryant

This is a very interesting question to me, as I am in a similar position from the reverse angle - my father is helping me to buy out my ex-husband's share of our property.

As I understand it, yes, interest would be taxable, as is any interest you receive from your Bank. However, if the amount of interest you receive is less than your tax allowance, then you won't have to pay any tax on it (but remember you also have to consider other sources of income). Conversely, my trainee-accountant sister-in-law believes that a straight-out family loan would be susceptible to taxation at receipt, if interest upon it isn't payable. I'm by no means certain about any of this, and thus I would advise that you take specialist advice on the matter.

The way around the problem that we have found is for my father to have a mortgage over the property - he will, in effect, buy an interest in my property which will grow as an investment. We're still discussing and assessing this, so I would be interested to know what you discover and would be happy to let you know how we get on when the solicitors come to arrange it all.

Cat

Having given both our son and daughter some cash to get them on the housing ladder we would like to give them some more. However as this involves us selling some of our investments our children have suggested that they pay us some 'interest' on what they are calling a loan. Does this 'interest' have to be declared and will it be taxed? I am recently retired and my partner will be retiring soon. Whatever we give them will form part of their inheritance and hopefully if we live long enough will fall outside the inheritance tax net. Any thoughts on our intentions?