Is there tax on inter family loan ?

I realise that an interest-free loan could certainly be seen as a method of avoidance in terms of gift tax thresholds etc. but if there was any rate of interest applied to this personal loan, surely this would not affect the gift tax threshold.

Just unsure if loans between family members are treated differently is all.
 
L0llip0p said:
I realise that an interest-free loan could certainly be seen as a method of avoidance in terms of gift tax thresholds etc. but if there was any rate of interest applied to this personal loan, surely this would not affect the gift tax threshold.

Just unsure if loans between family members are treated differently is all.
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Did you read the link I posted? It's a very simple principle.

It's not sufficient that "any" rate of interest is applied - the difference between the rate applied (which is nil if it's interest free) and the rate that the recipient would have to pay a bank for an equivalent (i.e. in this case unsecured) loan of similar amount, is the deemed gift.

So, if you lend it at 0.5% and a bank would charge 10% then there is a gift element of 9.5%.

The only difference for family members will be the different thresholds that it is eating into.
 
I did read the article yes.

This doesn't seem right in so far as I am willing to loan money to a person (thus taking a risk if unsecured) but yet the rate I apply must match that of a profit driven lending institution? Am I not control of my own rate? My own risk?

Why be punished here? Seems grossly unfair?

Its like saying all people on tracker rates should pay an extra tax......
 
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L0llip0p said:
I am willing to loan money to a person (thus taking a risk if unsecured) but yet the rate I apply must match that of a profit driven lending institution? Am I not control of my own rate? My own risk?
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The issue is nothing to do with you/your situation/your risk - and no-one is telling what rate (if any) to apply. Revenue are assessing what benefit accrues to the person being lent the money - what value should be placed on the benefit they are receiving. The issue is looked at entirely from the point of view of the recipient of a benefit. An available alternative commercial rate seems a fair way of assessing this.
 
orka said:
The issue is nothing to do with you/your situation/your risk - and no-one is telling what rate (if any) to apply. Revenue are assessing what benefit accrues to the person being lent the money - what value should be placed on the benefit they are receiving. The issue is looked at entirely from the point of view of the recipient of a benefit. An available alternative commercial rate seems a fair way of assessing this.
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I know this thread is old but just in case someone searches across it as I just did ... the information above is wrong according to what looks like professional tax advice linked from this thread:

https://www.askaboutmoney.com/threads/helping-son-buy-house.207995/

Things are assessed from the point of view of the lender -- what rate of interest they could get from a bank.
 
Not clear to me whether the ‘notional’ interest rate is that which would be charged by a bank or how much you’d get if you lodged it in a savings account.

Also that link mentions personal loan rates, but mortgages are a much lower rate.
 
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