Does anyone know if this payment is allowed or needs to be taxed?

[hodngojy]

My parents are going to give me 40k to put towards my mortgage. I want to pay it down straightaway. I have checked there’s no fees for it as sadly 40k is within the annual overpayment limit 😅

but are they allowed to just give me money like that with no tax deduction? By either them or me?

If they die within 7 years you may have to pay inheritance tax on it. Other than that no!

@SapphireOpal thank you very much

Yes they can gift you any amount of money tax free, however if they were to die within (I think its) 7 years it would be liable for inheritance tax

Spot on! However check that your mortgage lump sum/overpayment rules as an early repayment fee may be required depending on your T&C's.

It would only be liable for inheritance tax if their total estate value is over the threshold.

It's a PET or potentially exempt transfer. There is no such thing as gift tax in this country so it is tax free at your end. If your parents were to die within 7 years then inheritance tax might be payable but the inheritance tax is paid from their estate. The inheritance tax tapers as well so if they survived 5 years there would be less tax payable than the full 40%.

@Frugalfruit thanks that’s really helpful

If there is any possibility that your parents need to go into a care home in future and apply to the council for funding, the council could look at this as deprivation of assets.

The inheritance tax on a PET is on a sliding scale if the donor dies within 7 years after the gift, so within a year you pay the full whack, less within 2 years etc etc.

Also, if it's from both your parents, get them to make 2 separate payments of half the total, and draw up a signed letter or document saying that your DM gave you half and DF the other half, so if one of them dies within 7 years, you're only liable for IHT on half the gift.