Adam Thompson, tax manager of expat financial advisers The Fry Group says that in general terms there will be no UK income or capital gains tax implications arising from you gifting your son £85,000.
“This will be the same whether you gift your son the money as cash or simply pay the money directly to his mortgage company in settlement of the outstanding mortgage,” says Thompson.
“Your son will, by paying off the mortgage, be reducing the level of expenditure (mortgage interest) that can be offset against the rental income that he is receiving for tax purposes, and this may increase his income tax liability arising from the rental of that property.
“From an inheritance tax perspective, and assuming that you are both UK domiciled, the gift of money by you, to your son, will be classed as a potentially exempt transfer. In simple terms this means that provided you survive for seven years after making the gift then no UK inheritance tax will be due on that gift. If you do not survive seven years, then a UK inheritance tax liability may arise.”