Gifted money for house deposit

[Livedandlearned]

My dad has kindly offered to give me a large amount of money to use as a deposit for a house. This would be my first home and my dh's second, he doesn't own any currently, his ex wife lost their first due to gambling debts.

Anyway I am worried about tax implications when receiving money that was due to be my inheritance.

I am also wondering what is the best way to go about using this money for a deposit; should I get a small mortgage and pay it off quite quickly or do I go for a bigger house and sell it when my dc move out? I have one son still living at home, I'm 42 my dh is 54 and we both work full time, combined income is 60k.

Sorry for the morbid question, but (assuming you are in England, different rules in Scotland and elsewhere) it all depends on the total value of your Dad's estate (including the money he intends to give you as a gift) plus how long you expect him to live? If the total value of your Dad's assets (including his own house) is under the IHT threshold of £325k and/or he lives 7 years after making the gift, then there is no tax issue there. If he was to die within the 7 years and his estate including the gift is over the threshold, then there could potentially be tax to pay on a sliding scale (as described here ).

But even if there was tax to pay, you wouldn't necessarily have to meet that money out of your own pocket, it would be taken from his estate so providing you are also a legatee in his will and there is enough assets left to cover the tax, it could all be sorted at that point, so for instance let's say your Dad gives you £100k now, and then sadly dies 5 years later, leaving a remaining estate of £500k split between you and a sibling, there would be £16k IHT to be paid on the gift and approx £150k IHT to pay on the remainder (simplified example, there are exemptions etc), leaving £334k to be split between you and your sibling - you could just take less than your share of that money to account for the fact your early inheritance also had to be taxed, if that makes sense?

Re how much mortgage to take out, sorry to be vague but the answer is it depends - on your total earning capacity, outgoings, accommodation needs, cost and availability of housing in your area and the likely capital growth of any property. In general I would say the lower the mortgage the better, and it certainly doesn't make a lot of financial sense to be frequently buying and selling properties and moving around (unless you are 'flipping' properties, renovating and selling for huge profit etc) as you end up spending lots on sunk costs like legal fees, stamp duty, estate agents commission etc, so my instinct would be to get the smaller property now, assuming it could still accommodate you, DH and DS in reasonable comfort and/or your son living at home is leaving imminently. If of course your DS is only 10 and will be at home for 10 years plus and/or there are other reasons for needing a larger property now and you can comfortably pay a larger mortgage, then go for it...

Without knowing OP’s family circumstances this is potentially misleading. On leaving a property to a direct descendant the father would get an additional nil rate band if £175k. He may have owned the property and been left assets with/from the OP’s mum in which case not only her IHT allowance but also additional allowance may be available (Based on a proportion of what allowances were at the time of death). Those allowances based on today’s figures total £1m.

Thank you both. I've decided to go for a smaller mortgage as my osteoarthritis has flared up these last few days and that has given me a glimpse into the future regarding working to pay off a large mortgage that I didn't need to start with.