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ARTICLE · 10 JULY 2023

Can I Avoid Inheritance Tax Through A Loan?

Thomson Snell & Passmore
Thomson Snell & Passmore
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I gifted a property to my children and the seven years have now passed and so the house is outside inheritance tax (IHT).

United KingdomTax
Simon Mitchell
Simon Mitchell

I gifted a property to my children and the seven years have now passed and so the house is outside inheritance tax (IHT). The house was sold this year and the necessary capital gains tax paid, but I am now moving and my children have lent me £600,000 towards the purchase of my new home using the sale proceeds of the gifted house.

I have been advised that if I pay HM Revenue & Customs an annual sum to show the loan is income, this should then keep the money out of my estate for IHT purposes. Do I need any further legal documentation to protect the children from potential tax on my demise or will a promissory note for £600,000 payable from my estate on my death be sufficient for HMRC together with my annual tax returns showing the loan as income?

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