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Parents borrowing to help family buy: the route sets the inheritance tax

ended 01. October 2026

Parents and grandparents are raising money against their own homes, or joining a child's mortgage, to help their family buy. In Suffolk Building Society research reported on 29 September 2026, 16% of brokers had worked with older borrowers who wanted to join a mortgage to help a relative.

One route is a joint borrower sole proprietor (JBSP) mortgage. The parent is on the loan but not the deeds, so in England there is no 5% second-home Stamp Duty surcharge and a first-time buyer child can still claim first-time buyer relief on a home up to £500,000. The catch is that the parent is liable for a debt on a home they do not own.

Inheritance tax is where the route matters most. A lump sum handed over, whether from savings or released from the home, is a gift that can still be taxed if the parent dies within 7 years. Regular help paid from surplus income, such as monthly payments out of a pension, can be exempt from day one with no cap, provided the parent's standard of living is untouched. Borrowed money is capital, not income, so a lump sum raised against the home cannot use that exemption. Same help, very different tax.

  1. When a family asks for help with a deposit, should the inheritance tax treatment weigh as heavily as the Stamp Duty saving, or is it a problem for later?
  2. Which parents are most exposed: those releasing a lump sum in their 70s, or those carrying a JBSP loan on a home they do not own?
  3. Have you had a client change how they helped a child or grandchild because of how the help would be taxed? If so, please give as much colour and detail as possible.

4 responses from the Newspage community

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Harvey DhillonVerified
Founder & CEO at Zmartly
Most families get the structure right and the paperwork wrong. Lenders want a letter confirming the deposit is a gift, not a loan, and that matters for inheritance tax too. If the family privately treats the money as a loan to be repaid, it stays in the parent's estate. A genuine gift drops out completely once the parent survives 7 years.

Regular help from income is better still: exempt straight away, with no upper limit, provided the parent's usual standard of living is untouched. But executors have to prove that years later, from the parent's records. So keep a simple log of every payment and the income it came from, and of any lump sum: what, to whom, how much and when.

Money borrowed against the home is capital, not income, so it cannot use that exemption. Whatever is owed on a lifetime mortgage at death is deducted from the estate, but with interest usually rolling up, that debt keeps growing in the meantime.
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Stephen PerkinsVerified
Norwich Mortgage Broker and Managing Director at Yellow Brick Mortgages
Parents helping children onto the property ladder increasingly have more options than simply gifting a deposit, but each route creates different consequences. A joint borrower sole proprietor mortgage can boost affordability without the parent owning the property, but they are still fully liable for the mortgage and that can affect their own future borrowing and retirement plans.

Likewise, releasing equity to provide a lump sum may help the child today but leaves the parent with additional borrowing against their own home. Families need to look at the whole picture, including tax, rather than choosing whichever route produces the biggest mortgage.
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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
Family help should never be structured around Stamp Duty alone.

A JBSP mortgage can preserve first-time buyer relief because the parent is liable for the mortgage without owning the property, but that creates a serious mismatch: they carry debt on an asset they do not own.

For lump-sum gifts, inheritance tax matters too. Most gifts can remain relevant for seven years, whereas regular gifts from genuine surplus income can qualify for an immediate exemption if the donor can still maintain their normal standard of living.

That distinction is huge. Borrowing against your own home to gift a deposit is capital, not income, so you cannot simply treat it like regular gifting from pension or salary.

For parents in their 70s, I would be especially cautious about locking themselves into debt or reducing future care flexibility.

Helping the next generation is powerful. But the structure has to protect both generations.
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David StirlingVerified
Independent Financial Adviser at Mint Wealth
Families are rightly focused on helping children onto the property ladder, but how that support is structured can be just as important as the amount involved. A JBSP mortgage, a gifted deposit and regular support from surplus income can all achieve similar outcomes, yet the tax and financial implications can be very different.
The best conversations look beyond the immediate house purchase and consider the wider picture, from inheritance tax and retirement planning to future flexibility. Getting the structure right at the outset can save families a significant amount of money and stress further down the line.