The Irish Home Show 104 – Bank of Mum & Dad – with Alan Purcell @CloudAccountsIreland

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Nearly 50% of Irish Home Buyers need help from the Bank of Mum & Dad. Gifts from Family and Friends is sometimes the only way to afford a deposit for a home as prices become less affordable to the average household. For those fortunate few, it can be a lifeline… but there are risks and tax implications.

So this week in Part 4 of our House Buying Guide, I talk to Alan Purcell from CloudAccounts.ie who talks us through how a parent or family member can ‘loan’ or ‘gift’ you money to help buying a house.

  • Why you should consider your ‘Lifetime Limit’ of Inheritance and Gifts.
  • How much your mother, brother, uncle and best mate can give you.
  • A clever trick to get €48,000 from your parents over New Years… TAX FREE!

I also go through our Mortgage Application Checklist in my Explainer section – and Alan goes into detail about self-employeed mortgage applications, plus other taxes involved in buying, selling or owning a home. Find Alan on Instagram too @CloudAccountsIreland

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At the end we have our fun features – In, Out and Away & New Home vs Old Home – plus a round up of this week’s news you need to know.

Find out more about the house buying process at www.IrishHome.ie and Follow us on Instagram @IrishHomeMagazine

If you are starting your Home Buying Journey, order the Irish Home Buyer’s Journal here…

Transcript

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Hello and welcome to episode four of the Irish Home Show. Each episode in this season, we are taking you through every stage in your house buying journey.

So far, we’ve covered savings and mortgages. week This week I’m gonna go into more detail about the mortgage application process and take you through our mortgage application checklist, 📍 everything you need to prepare before you submit your application.

After that, I have a fantastic interview with Alan Perel from Cloud Accounts. Alan is gonna be talking us through something that’s probably quite important for about 50% of Irish home buyers out there. The bank of mum and dad. About half of Irish home buyers are fortunate enough to have help with buying a house from family or friends or extended. For those fortunate few who have parents that are able to help out, it is a lifeline to put a deposit together or be able to get a mortgage and get a place of their own.

house prices so high, it’s almost become impossible to buy without some help from family and.

Alan is gonna be talking us through the various implications for tax and personal finance, from getting a gift from family for both you and them, and a clever trick of how you can take money from them tax free without affecting your lifetime limits. Alan as an accountant is also very helpful in talking us through what you might need to put together for your mortgage application if you are perhaps self-employed. And finally, we’re gonna cover any other taxes that are involved in the house buying or the house owning process.

Thanks for tuning into the Irish Home Show so far. I’m Ben Thompson, your host. I’m a friendliest estate agent and I am here to help you in every stage in your journey. You can either go online to my website at Irish home, do ae where you can find all our information and guides. You can buy the Irish Home Buyers Journal, you can also find us at Irish Home Magazine on most social media, particularly Instagram, where you’ll find more of our tips. Up to date guides and latest. 📍

Now let’s get on with the show.

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Hello, and welcome to the second 📍 part of our mortgages and finance explainer section. Last week we talked through the process of applying for a mortgage, whether through a bank or a broker, and how to get yourself mortgage ready so you can get your perfect application. In this week, I’m gonna delve into a bit more detail about the mortgage application process and talk you through our mortgage checklist that you’ll find in the Irish home buyers.

If you haven’t got a copy of this already, you can get one from our website If you wanna follow along at home, it’s on page 22 of the new Irish Journal. But also you can download a free worksheet from our website. Just go to Irish home dot e slash free.

when applying for a mortgage, whether it’s with a bank or a broker, they’re gonna ask for a bunch of information, documents, and materials

they’re really looking at three areas. One, who you are, two, how much do you earn? And three, how much do you spend?

As we detailed last week, the banks are trying to see how much you can afford to pay, how much you’re earning, and how much you’re spending at the moment, and just to see if you can afford the mortgage repayments. Are you gonna be a good mortgage holder with them and repay them regularly every month for the next 20 or 30 years?

The first few items of documentation the bank are gonna ask from you should be really simple.

Firstly, they’re going to want to know who you are, and this normally requires three things. One proof of id. This is so they can affix the exact name and person that you are.

This could be a passport typically, or it could be a driving license or any other sort of official card.

Second proof of address. As with applying for anything official, they’re gonna need to see where you live at the moment. This is gonna probably help them track your credit score as well, so you need to give them a current proof of address. If you’re living somewhere renting already, you should probably have bills for utilities, et cetera. If you’re living at home still, well I, I’d hope you’d have a bank statement or something like that, which should have your address on it, something official from a proper company. The third thing is proof of your PPS number. They’re going to want to see your PPS number so that they know that you are able to be employed or readily employed person in the state. If you’re from abroad, they may need to see a work visa as well to show that you are allowed to work here and for how long.

The best thing for your PBS number is usually a pay slip. It usually has it printed on there.

Part two, proving what you earn.

The most straightforward way to show what you earn is to be providing payslips. They may ask for the most recent three to six months of payslips from your current employer. The second thing they’ll need to see to prove your annual income is an eds, an employment detail summary. This used to be called the P 60. It’s now eds and you’ll find it if you’re registered with revenue.ae, you’ll be able to download it from there. If you’re just p o, ie with your company, you may have to ask payroll, HR to find it for you. This is a detailed summary of your total income for the whole year, and your various tax bans and allowances.

This is probably more useful to them than the payslip, which perhaps if you’re seasonal or bonus based and you have up and down in your income month by month, this allows ’em to see the total annual take home pay.

If you’re self-employed, you’re gonna have to overcome a different standard of documentation for the bank. You’ll need two years of tax returns. This is the Form 11 that shows everything that you’ve claimed that you earned in the last year, minus your expenses. You’ll need an up to date tax clearance search. This is a statement from revenue saying you have paid all your taxes, you don’t have any outstanding or, Finally, they may ask you for six months of accounts from your business account as well.

We’ll talk more about this with Alan Perel in the interview after this section.

So they’ve asked for who you are, how much you earn now for the tricky bit, how much you spend. The next couple of items they’re gonna ask your bank or broker will require between three and six months of your most recent bank state.

This is just purely printed out in full so they can see everything you spent money on, what and all.

So you’ll need to give them the bank statements for your main account where you are paid your income into. You’ll also need to show them any bank statements for any other accounts you hold. So that might be a second savings account with your bank. It may be a savings account with a different bank.

It might be a Revolute or other Neobank account. Uh, it may also need to see your credit union savings account as well.

Now, what are the bank looking for when they’re looking at your bank statements? Well, first things first, they’re gonna be cross referencing your income to see that it matches your payslips or your EDS form that you’ve provided already, just to see that you are getting paid what those say you’re getting paid and it adds up on a net yearly basis.

But secondly, and this is a scary part, they are also gonna be looking to see what your outgoings. They’re gonna look at your rent payments. They’re gonna look at your bills, your utilities, uh, any credit card payments, any repayments of car loans or credit union loans. Uh, they’ll look for childcare fees

and they’re going to be trying to build up a picture of what’s your income on one side and what are your outgoings on the other side? We’ve covered this in previous episodes. Go back and listen to those. They wanna see that your total income, minus the total expenses, leaves enough for you to pay the mortgage.

So if you’re earning 4,000 euros a month net, but you have, you know, three and a half thousand going out on all your expenses doesn’t look like you’ll be able to pay enough for a typical mortgage. Now be aware they will take into account rent. So if you are paying 2000 a month in rent, they’re gonna understand that you’re not gonna continue to pay that anymore once you buy the house.

And so that 2000 would be a direct correlation to what you can pay on the mortgage. So don’t worry about that. Equally savings. If you’re saving a thousand euros in a savings account and you’re paying a thousand Euros on rent, again, there’s 2000 euros there. They know you have the repayment capacity to afford payment on.

It is worrying when you hand over months and months of statements to the bank and you can pray and hope that they don’t look through all the fine detail, but I promise you they do. Uh, don’t be afraid, but get yourself prepared. That’s why we’ve said in previous episodes, and we go through in the journal and in our teachings, spend the six month leading up to a mortgage application, getting your house in.

Cut back on unnecessary expenses. Pay off any debt that you can clear and don’t, uh, undertake any nefarious, uh, activities such as gambling, Bitcoin buying, or anything else like that that looks excessive and that would worry a bank.

Finally, one last detail. For all those self builders out there, you’re applying for a mortgage. You are going to need to go through the same steps as any other buyer, but you’ll need a few extra items of material. Firstly, you’re going to have to show planning permission and an OSI map of the property that you are looking to get a mortgage on.

Secondly, you’re going to have to have a full set of costed plans from an architect or a qs. And thirdly, they’ll want to see your architect or your expert details, uh, information.

Most self builders will probably already own the land or have bought the land without getting the mortgage. It’s very hard to get a mortgage by a plain plot of land that you’re hoping to build on. So hopefully you’ve done that stage already and you’re looking for the mortgage to help pay for the construction costs.

That’s it for our mortgage application checklist. That’s your last step in getting yourself ready to go to a mortgage broker or to your bank to apply for your loan. Go look at the Irish Home Buyers Journal there, and you’ll find a, uh, a free downloadable copy of that@irishhome.ae slash free.

Uh, work your way through that checklist. It may take you a few weeks to request payslips or eDS statements from your employer. Uh, you may need to go through and print out bank statements from your computer or from your phone. Uh, you may need to request certain things like tax certs from revenue. Take your time, sit down and work methodically through this list, but above all as my advice last week.

Go to a broker and engage their services early on, and they’ll have their own list. This is a rough overall list. Some will come to you and say, Look, that particular bank needs a particular thing that isn’t here. Go to a broker early six months early if you can.

They will help you get prepared and get everything in order so that you can make your best application.

Now, coming up next, we speak to Alan Perel from cloud.

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Today on the podcast. I have Alan Perel from cloud accounts. He is a chartered CTA, a tax advisor. Uh, Alan, how are.

Good. Ben, how are you doing?

Um, I wanted to bring you on because as you know, we through, uh, in the first season of the Irish home show, we are talking about the house buying process, uh, mainly for first time buyers, although it, you know, it will be applicable for We’ve talked through savings. And last week we were talking about with Martina Hennessy. Uh, this week I wanted to bring up a topic. it to me, uh, online and I thought, actually, there’s something really need to cover. The, the number of people who are buying houses with help from family and friends, with the so-called bank of mom and dad is extraordinary.

I think last year alone, it was around 40 or 50% of buyers needed to have some help from parents. there are some, you know, considerations In getting money as gifts from friends and family, uh, and it may be tax efficient to do it in certain ways. you, you thought we should have a chat about this and I appreciate you coming on.

Um, is it common? Is it something you deal with a lot, you know, talking to people and advising people on lending money to family.

Yeah, it’s huge. And, uh, we touched on it just before coming on here that, you know, we both know so many people who found themselves in exactly that situation, where they needed to go to the bank of mom and dad. I mean, nobody likes having to do it, but unfortunately the way house prices are going. It’s only one way.

Um, and sometimes, you know, it’s, it’s a fortunate position to be in completely appreciate that. Not everybody has this luxury. Uh, you know, you’re a parent, I’m a parent. Um, thankfully this conversation’s probably a long way down the line for us, but, um, you know, you only want to do the best. You can help your kids out, get them onto that.

Property ladder, I suppose. And yeah, look, not everybody will be able to do it. Not everyone wants to go to their parents and beg, borrow or steal. Uh, but unfortunately, you know, it’s just the, the times we live in and anyone who is lucky enough to have that available to them, there’s a few kind of clever ways that you can structure some of these.

Borrowings or gifts or whatever, you know, way it’s going. The, the money is gonna transfer from the parent to the child that might just help you not have a future tax bill or anything going to revenue. And all of these are completely above board and legal. There’s nothing, uh, strange going on here. It’s just about having the knowledge, uh, and applying it in a certain way.

And then, you know, you, you might be leaving yourself, uh, with less taxes to pay in the long run, which is always a good I

right. You know, I, I, I was fortunate. We wouldn’t have been able to buy when we did without family help. I think know, most of the, younger buyers who come through my office almost always have, some family help in one way or another.

It’s very hard to buy in this market. A lot of parents of our generation people in their thirties. Their parents have quite a lot of equity in their house. Uh, they were the ones who bought in the seventies or eighties, uh, and they’re quite fortunate.

So they do like to pass it down. Unfortunately, it’s a great inequity. Inequity that, you know, probably half of the population are lucky enough to have a parent who can, and there’s another half who can’t. So it is a challenge that anyone who is, uh, doing it on their own, I have huge respect for, and don’t anyone who doesn’t have, you know, uh, to help, but coming outta it, you think it would be the most natural thing in the world.

Why, why can’t, you know, for all of our lives, are parents have been, have been, you know, helping us out with money and, and no, no more than like the present. I think everyone is sort of always looking for help from. Um, is it that it’s not just a naturalist thing that they can just give me money?

Why is the tax man gotta get involved?

Yeah. It’s and it’s a contentious one for a lot of people, because the way people kind of think of it is that my parents they’ve worked hard. They have generated income, they’ve paid income tax PA way, the whole way along. So this money has already been taxed. And now when they tried to pass it on to the next person, uh, to their child, the tax man has a look at it and says, well, you know, we might want to take a piece of that as well.

I suppose the counter argument to that is, and I’m not sticking up for the revenue here at all. Is that revenue are probably deeming it to be income. That’s not. Been earned by the child it’s just been handed over. Um, now with that in mind, they have thresholds that exist that certain amounts, uh, certain values can transfer from people to other people, uh, there’s categories.

And we’re touching that in a minute. So it’s not necessarily always parent to child. There are other relationships that come into the fold as well. But yeah, as I say, it’s just, it’s contentious. It’s been taxed once. So you would think in an ideal world that money has, the tax has been paid in it it’s free to go. Very hard to, to, um, to avoid it, which is the whole, um, name of the game. But I suppose, yeah, look, the there’s three categories, uh, really Ben that apply and need to be kind of considered for this.

So with gift tax or capital acquisitions tax, same thing, different names. There are three categories. You’ve got category a, B and C, and they’re literally called a, B and C, uh, on nots making these up, uh, a is apparent to a child. B is pretty much a blood relative. So you’re talking siblings, grandparents, uh, aunts and uncle, that kind of thing.

Yeah. And C is what they call not a and B. So pretty much strangers. So you and I, I guess, will be category C, uh, and then there’s different thresholds that apply to those categories. So these are all what are called lifetime, uh, limits or lifetime thresholds. So category a. Is 335,000 Euro, and that’s not 335,000 Euro per parent.

Unfortunately it’s 335 grand cumulative from both parents. Um, and that’s whether it’s a gift or whether it’s an inheritance that you take from uh, you when, when they pass or.

your, your, your family had been very generous during your, your lifetime and, and given, given you, you know, money to help buy a house or et cetera, um, you know, when unfortunately one or both of them pass away, um, that, uh, 335,000 euros.

Is a lifetime cap. So you have gone over it in during their life, or you may be close to it. And then if in their passing, you inherit their estate may, maybe it’s a, you know, it could be a four bed suburban house in, I, in south Dublin where, where I’m based and you’ll be well over the limit between, you know, two, two siblings, um, you’re gonna blow right through that tax threshold.

So it’s not just they give you during sort of their also the, when they pass away, unfortunately, what is coming

Exactly. Yeah. And look, I’ve heard of, you know, parents that have given gifts to their children to pay for the wedding or a whole host of other things in between. And. Technically speaking, that’s also a gift and that in the tax man’s eyes is probably taxable income. So, um, it, it, it’s, it’s a kind of a, it’s just, it’s a hard one.

And as I say that threshold of 335 grand, you, you mightn’t be in a position to say. Take a gift of that in cash from your parents to, uh, to purchase a home. Some people will obviously most people won’t. Uh, but then as you say, if you were to inherit a four bedroom home and you know, family sizes are getting smaller and smaller previously, where you had eight siblings in a family and the house wasn’t as valuable because it was older times, then this wasn’t an issue, but now you could easily blitz through 335 grand on the inheritance of a property and what you end up having there.

Is the property usually having to be sold, uh, especially if there’s four siblings or some or two siblings who can’t decide what to do with it, um, sell it and pay the C a T and the way you go. So yeah, it, it it’s an awkward one, but then I suppose, you know, that 335,000 threshold you might be thinking is not very high, but when you come out to the next category, it’s only 2 30, 2 and a half thousand category B from blood relatives.

So again, if you had a grandparent who, or an uncle or an aunt that you get along very well with, and they, you know, they say, I want to. Help out, uh, little Johnny or little Mary and try and get onto this property. Ladder 32 and a half grand is quickly going to be blitz through, um, or run through, particularly if you had four grandparents who wanted to help you out, that’s now 8,000 each, you know, doing simple math.

Um, so it quickly, quickly can go. And again, that will be on. An inheritance or a gift. And then when you come down to category C, which is strangers, it’s, uh, 16,250. Now, I don’t know too many strangers who are gonna give me 16 grand , but it’s just, uh, it’s just one of those things. And as I say, it is lifetime it’s cumulative and.

It can once the, the threshold has been exhausted, that’s it, you’re now on the hook at the C a T or gift tax rate or inheritance tax rate of 33%. So that’s high. Um, I think that’s known that it’s high. And then the other thing to be kind of, almost thinking about or concerned about is that the tax commission recently have been suggesting that that 335,000 category a threshold should actually be reduced, which, uh, Yeah.

How do, how do we go lower? Particularly when house prices are only, um, only growing.

Yeah. And like,

understand. You know, they are of claim it as unearned income and, and it is important, you know, inherited taxes are important for, for the state to, to function, I guess. But, um, no, it is extremely tough as you say, if it’s a, a family where there’s just two siblings and they sell, you know, even a modest so just you’re gonna be well over that.

so just to recap now, just for now thinking of our first time buyers, so they could a gift from their parents up to, you know, most aren’t gonna get the full away of their house. So a reasonable amount. So say it’s 40,000 euros for deposit. That’s okay for the parents to gift to their kids directly.

But if it was a, an aunt or a sibling, uh, the limit would be 30.

32, 500. Yeah, 32,500, but classic accountant tax advisor here, I’m gonna put a big asterisks beside that and say, there is another thing to consider, uh, which is called a small gift exemption. So I recently touched about this on Instagram and this is the mechanism or this scheme and again, fully above board.

Yeah, exactly.

said

Yeah. Evasion is illegal.

the other night. this to me and I I had a message. You go, is that, is that true? That’s fantastic. Um, this is a clever, kind of a little trick, you know, it’s in small amounts, tell me, tell

Yeah, so basically small gift exemption, uh, and it is small it’s 3000 Euro. Uh, but what it does is it means that anybody in Ireland can receive a gift of up to 3000 Euro from anybody in a year. So. I can give you and I’m not going to, but I could, uh, 3000 Euro and there is no declaration to be made to revenue.

There is no tax to be paid on that 3000. It is yours to do what you will with. So if you start kind of putting the wheels in motion or start thinking about this, if you have, uh, a partner that you’re gonna buy a property, R and if the two of you still have both parents, um, around, and if you have, if those parents have the resources or the capital behind them to do this, Each of those four parents could give each of the two, uh, children, I guess, 3000 each.

So you’ve got 3000, 3000, 3000, 3000, uh, which is 12,000 times two because there’s two, uh, children. So you’re now a 24,000 Euro, which could be passed across with absolutely no tax, uh, being charged on it whatsoever. Liver.

limit of

It doesn’t. So when I was saying about the category C threshold, 16,250, uh, that I could give you 16,250 Ben and provided nobody, no stranger has ever given you anything before you could, uh, not pay tax on that. I can actually give you 19,250, but adding in that’s 3000 Euro, small gift exemption, and then yeah, you, you don’t have to do any or make.

Capital acquisition or gift tax payment on that. And what’s really good, I suppose, looking at the, the calendar, uh, or, or where we’re at now, we’re approaching the end of the year. So if anybody was actually looking to borrow from the bank of mom and dad in the coming months, and we all know how long it takes to buy a house in Ireland, I mean, personally speaking, I’m pretty sure.

Me and my wife went sale, agreed on our house around Halloween, whenever we just, before we bought it. Um, and I think it took six or seven months from then cuz it was around her birthday. We went EG agreed around mine that we bought the thing it takes forever. As you probably know, um,

You see it all the time.

So basically if, yeah, if again, I appreciate this. Doesn’t apply to everybody cuz it’s a lot of money, but if the potential was there to borrow these sums from the bank of mom and dad, and if you were to do it now or before the 31st of December, there’s 24 grand on the table that can be taken from those, uh, parents without paying any tax.

You could then do it again from the 1st of January and take another 24,000. So, you know, a 48 grand within the space of a couple of weeks or months provided you straddled the end of the year. And not 1 cent of that 48 grand will go to revenue. It goes directly to the kids. And then onto obviously whoever is selling the house.

that’s a size. Well, that’s sort of probably more than the average deposit, that is a very And, and you’re purchasing costs, in buying, , a decent size Dublin Um, so that’s, that’s incredible. So that could be, , maybe it’s not from your parents, maybe it’s from an uncle or a grandparent or a couple of elder siblings, perhaps you.

chip in and give you, give you three grand each, um, over the course of two months, you know, it twice and you can get 48,000 tax free. That’s a, that’s a neat little trick.

Yeah. And like, I go to 48,000 cuz it’s just the four parents to the two kids. Uh, and you get to 12,000 times, two times two, basically it gets you 48,000. But as you say, it could be a combination of a sibling, a grandparent, an aunt. A parent or whatever. So it’s 3000 per person do the figure out how many people you can tap for three grand and, and go after them.

But what I would say, cause you might get some really smart people listening to this who say, right, why don’t I just get mom to give me three grand and then get mom to give my brother three grand who my brother then gives me the three grand that is not allowed. Um, unfortunately, and people will say, well, hell they know revenue always they, they, yeah,

my

know They have weird ways of, yeah. They have weird ways of working. I dunno how they work, but they, they, they know. Um, and in fairness, like, you know, there’s gonna, in this day and age, there’s gonna be electronic records. This is gonna be done by bank transfer. No one is withdrawing three grand, handing it over.

We’ve moved on from those days. So yeah, the, the clever scheme will be, yeah, mom, disabling sibling to you, but not allowed. Uh, so don’t try that one, but anybody else who has their own three grands go.

fascinating. Okay. So we can get a gift from our parents That would probably be the normal route for most people. if that’s not possible, then you can do this, uh, three grand small gift limit, uh, as another alternative, um, from either friends and family or, you know, indirect, um, family or friends.

And what I’d just say as well on the parents say, if the parents were like, look, we’ve got 50 grand, we want to give this to you. Try and schedule it so that you’re taking, you know, mom gives you three grand. Mom gives the partner three grand. Dad gives you three grand. Dad gives the partner three grand and do that again in January or February, just so that you’re protecting your long term lifetime limit, that 335,000 threshold, uh, that I mentioned before, because that 50,000 amount mom and dad can give you that tomorrow.

Uh, and you won’t pay any tax on it. Get subtracted from your 335,000 lifetime threshold that you can receive from your parents. So that would reduce it to 2 85 in that example. And then in the future, you know, all likelihood, unfortunately on their passing, you might inherit the house and now only 285 grand of the value of the house that you inherit is tax free and you start paying and the rest.

So by, you thinking about this, now you.

maybe sort of young and healthy and still alive and think, oh look, that’s a long way away. And you know, I will worry about that then, but actually, you know, Lifetime limit. Uh, the clue is in the name. You’ve really gotta think about it, cuz there’s no, there’s no backseats.

I guess you can’t change that once you’ve taken gifts off them during their lifetime. Um, that’s all gonna add up over, over the that’s worth thinking your lifetime and not, you’re not gonna change it. So no And coming back to what we, we started mentioning you. We both have kids. Um, it’s something actually for people should be considering.

Perhaps parents should be, uh, on a regular basis, gifting this three grand to their kids and to their. Their grandkids and to their kids’ partners and things like that. And if they can set that up over long term, as you said, maybe it’s to fund a wedding and then maybe it’s to fund a house and then maybe support the, the grandkids and things like that.

You know, it’s not a bad idea as a, as a recommendation from an accountant, if they can provide that every year, you know, keep putting that into a long term savings account.

Yeah for them. And look again, appreciate not everybody is gonna be in a position to do that. It’s gonna be the very few, but if you did have the money, um, and if you could afford to do it, if you put that 3000 into a bank account in the kid’s name, you know, you could get that to a sizable chunk by the time they’re.

1821, whatever. Um, and hopefully at that stage, they’ll use it for something sensible, uh, and knock out to Vegas, put it on black or whatever. Um, but you know, another method of doing that might be even again, if it’s affordable, put the child benefit into a fund, um, if you don’t rely on it. Yeah. And again, it’s three grand a year.

Make sure you’re using the three round year, small gift exemption, uh, to your favor because it’s there for every.

Now, one last thing I wanted to ask you, Alan, is sometimes you hear about people, not just gifting money, but also actually formally signing loan, uh, with their parents.

why do people do that and how does that work?

This came up recently, I think, in the last year or so that the department of finance were saying there should be, um, Interest charged on loans provided to by parents, to children, maybe to purchase a house. And that there’d be a tax implication on that. And there was absolute uproar because again, you know, we all know the, the, the money needed is to buy a house is just substantial. And I think somebody sat down and did the mats and they realized that the tax revenue that would be generated from this was so small that it wouldn’t be worth going after. Uh, it would just cause so much paperwork, confusion, and uproar.

And eventually it got canned because again, this small gift exemption came into play that people were saying, well, yeah, if, if the parent loans them even a hundred grand and they charge 1% interest on that, That’s 10 grand. If you start taking off the small gift exemption from the two parents, that’s 6,000.

That brings it down to four. But if there’s two people in, in play here, there’s, that’s actually 12,000 of a small gift exemption. So there’s nothing to see. So again, paperwork compliance and it was just messy. So it got scraped. So thankfully that’s gone, but I suppose interest rates are rising. So if there was a loan put in place, now you’d probably be expected to benchmark that against what’s available on the market and that’s only getting more expensive.

So yeah, it’s a bit of. A minefield, but hopefully it’s one that will just

ignored for now.

it’s probably something that to consider, you know, just take a straight, uh, gift from your Yeah.

and don’t worry about

We, we touched on inheritance there and if, if someone inherits that house off the family, you know, they will quickly go over their limit if it’s a sizeable house.

But what happens if, say one of the kids have been living in the for, you know, the duration of their life or for the last couple of years, perhaps they’re there looking after mom or dad in their, in their later. Uh, is that not something that they can, you know, avoid getting a big tax bill PO possibly having to force to be sell the house

Yeah, there is, it’s a very specific, uh, tax relief. It’s called dwelling house relief to give it its formal title. And it’s not gonna again, apply to everybody, but if it does apply, it’s very worthwhile, uh, taking advantage of cuz you could inherit a house completely tax free. So, um, how it works is the person receiving the inheritance.

Cannot have an interest in any other home. And then they have to be living in the house for the three years prior to the inheritance, and then they would need to keep it as their main home for the six years

of rules

there’s sizable chunk of time here, but. Lot of rules. Yeah. And they that’s why it won’t apply to everybody, but where this particularly would apply would be maybe you might have an only child.

Uh, who’s looking after an elderly parent and or another example could be, yeah, you might have maybe one or two siblings. One of whom is set up they’re on the ladder. They’ve done well for themselves or whatever. It might be the circumstance. And the neither person may have stayed at home to look after a parent or just didn’t have the opportunity to move out a home.

And, you know, if they get the sibling on board and say, look, there’s a way around this, we’ll talk about money later on, or I can, you know, I can give you three grand year tax free for the rest of your life or whatever. Um, as a reward, then you should be looking at this. It’s very morbid. I know a couple of people who are kind of in this situation and I’m with my tax hat on going.

Thinking to myself, I really should tell them, you know, don’t move out, stay where you are, because you could save yourself an absolute fortune. Particularly when we go back to that group, eight threshold, 335 grand. If you inherited a house in BlackRock, that’s worth one and a half million, 2 million, whatever.

Uh, and you’re the only person living there. You’ve lived there for three years. And you keeper for six years after, again, not 1 cent goes to revenue and yeah. Why would you leave? , not to encourage people to stay just for that reason. ,

in their thirties are still staying at home these days more, more and more common. Um, it’s and, and parents are getting older. Um, they probably are, you know, getting into their Twilight years and you know, the, the 30 something year old should stay on and stay in the house.

It might be worthwhile if it’s only a few

And this is just called tax planning and it’s just, you know, knowing the rules, um, and look, there’s millions of rules when it comes to tax in Ireland and you could never know them all, but knowing these small little. Yeah. Well, I just wanna get that information out there to be honest with you, because you know, if somebody leaves that house with a month ago and then realizes, oh Jesus, I could have actually avoided paying, um, you know, hundreds of thousands of, of inheritance hacks there.

Then happy days let’s try and help people find that out. .

So Adam, one other thing that comes up quite a lot, uh, we were talking about mortgages last week. I’m finding more and more people are, uh, self-employed these days, whether they’ve started their own business or perhaps they have side businesses, earning them some money.

Uh, there is a, a different stage. I different set of stages to go through as a self-employed person or someone with side income. Uh, when applying for a mortgage, I know you’re not a mortgage advisor, but as a tax accountant, um, you help people prepare this. What is the extra steps needed for someone who is looking to get a.

But, uh, have to declare their own

Yeah. Get, ask this a lot by clients. Can you provide me with X, Y, and Z? My broker is looking for it. So usually what, uh, what the banks are, what the brokers are looking for. There would be tax clearance for a start, just to make sure that you’re up to date with revenue nothing’s owning, nothing’s outstanding to them.

Um, and you should be able to get that text clear insert from your. Uh, your revenue Ross account, or get your accountant to print it out for you and nice straightforward process. So, yeah, that’s usually kind of top of the list just to make sure that nothing is missing. And then I’ve also been asked a lot for either copies of the form 11 or copy of it.

What’s called a chapter four, which is basically revenues summary of the, um, self-employed figures and tax return that you’ve provided to them for. The last couple of years that are in question that are taken into account. So very similar to how you’d be asked to provide a few payslips to kind of prove your salary.

If you’re on the employee side, when you’re self-employed, I suppose the bank is looking to get comfort over the income that you’ve had over the last couple of years and just make sure there’s no kind of crazy jumps or dips or anything like that. Uh, and just see kind of what is this person generating?

What are they earning? And yeah, the best way of doing that. Presenting, maybe your, your profit and loss of your income and expenditure account, which your accountant will be preparing for you. And then kind of backing that up with the form 11, which is the tax return that gets submitted to revenue, uh, once a year or what is called a chapter four.

I think it’s a summary document that basically really high level just says. Income was this tax payable was this and away you go. And because it’s, you know, downloaded from revenue with all their logos and stuff on there, it’s very ironclad, you know, official document that yeah, the broker, the bank, they’ll they’ll look at that

I guess it’s easy for a normally employed person. They’re on ay E. They have their pay step every month. And if you’re on a consistent 40 year, every month is gonna be the same.

I appreciate for a self-employed person, you know, they may be varied. It may go up and down each month. It may be seasonal. You may have had a fantastic year this year and you wanna capitalize on by getting a mortgage. They, I think the rule of thumbs are gonna look for at least two years of your, your form 11 or your chapter four.

Um, and go back through those to make sure your business is consistent. And you just haven’t had a fluke, a fluke year. selling, selling something this year.

And off the back of the last couple of years as well, you’re gonna see a lot of people. Who’ve had obviously a bit of a dip off the back of COVID and not been able to run their business. So you might actually get a couple of banks who could potentially turn around and say, well, we wanna see what was happening before COVID because, you know, hopefully you’re, you’re gonna get back to that position again.

So like all these documents, they live within your revenue, your raws profile, and an accountant who, or your tax agent should be able to get them for you. Or if you’re doing it yourself, they’re all in. Download them PDF and provide them across to your broker or to your bank. And yeah, they, that should be fine.

And the only other one thing I’ve ever seen requested was a list of like charges and payments. It was basically just, again, another revenue document to say that you’ve paid everything over that you have to pay. But I think the tax clearance cert would normally kind of Trump all of

a row and, you know, have a good accountant on your side to get everything

Yeah. Pretty much. Yeah. And again, the final thing I think will be, you might get requested a letter from your accountant just to say everything’s up to date or yeah, just certifying the accounts to say the, I prepared these accounts, I’m a qualified accountant or a chartered accountant and these numbers are correct.

So again, yeah, that might be asked, but the, once you have those documents, everything lined up, hopefully that will get you over the.

I know we are talking about the buying process at the moment. Um, but is buying with a view, perhaps look, I’m gonna sell this house. You wanna buy a house that’s in good standing, that just in case you need to set it later, maybe people are buying a starter home and they think, look, we’ll and we’ll move up the ladder later.

What’s the tax implications. When I sell my house that I’m living

Yeah. Well, once you only have the one house that you’re living in that that’s, what’s called your principal private residence and basically revenue don’t charge any capital gains tax on, on that. So theoretically you could buy, you could have bought a house in BlackRock and. Bottom of the crash. Uh, let’s say for 200 grand and you could sell it now at the peak of the market for, I dunno, 2 million making up numbers here, um, and provided that that’s your, uh, your principle private residence there again, there will be not 1 cent of capital gains tax to be paid over to revenue now.

The only. Thing to consider there would be if maybe you went overseas and rented the property out for a while, if you weren’t living in it. If, if you had a second home, for whatever reason, you moved down the country and it’s not your principle private residence, you’re gonna need to do a calculation and, uh, pay capital gains tax on the period of time that it wasn’t your principle residence, but provided you’ve lived there all along.

Uh, and that’s always been your home then you’re not gonna have any

private

Uh, ,

while we’re talking about tax and revenue, there’s one other area that I believe that you, you, you need to be involved in as well when people are buying a new home and availing of the help buy scheme that, uh, is a tax back scheme, essentially. How does that work? And, and why would they need your help

Yeah. So, uh, the helped device scheme, I think it was launched a number of years ago as 2017 or something like that. And basically look how it works is it only applies to first time buyers, it will apply if you are either buying a new home or if you’re a self building a new home and basically then you have to live in the property for five years.

Acquiring it or building it. Otherwise there’s gonna be a clawback, but basically revenue will give you either. 30,000, um, of help to buy, or they’ll give you 10% of the value of the home, or they will give you the amount of income tax that you’ve paid in the last four years. So it’s the lesser of those three amounts.

And they’ll basically, yeah. Give that to the developer to reduce, I suppose, the amount that you have to pay over, uh, on purchasing the property. So there’s a good saving to be had there provided it’s the first time you’re and you’re buying a new

if new bill I wanna buy, and let’s say the deposit is 45,000 euros. you know, they will, you submit it through the help to buy sort of websites. It’s detached with revenue they basically look at your tax bill and say, look, you’re qualified for the full 30,000 euros.

Um, they will pay that 30,000 direct to the developer. Uh, it’s come from your taxes. You pay them in the last four years or so. They’ll pay that to the developer and you only need the reduce the,

rest pretty

really helps really helps. First time buyers that they need to accrue up front.

It can make a

Yeah, a hundred percent.

Great. So, we’re talking taxes, is there any other taxes that we haven’t talked about when buying or owning a house?

Uh, two that jumped to mind, one would be stamp duty. So when you’re purchasing a house, uh, you’re gonna pay stamp duty. The solicitor is gonna sort that out for you. Uh, sorry. He won’t pay it for you, but they’re gonna tell you what you owe. And that one is it’s 1% of the value of the property up to a million Euro.

And then if you’re buying a property over a million Euro, it’s gonna be 2% on anything above the million. Uh, so that one. But look, bear that in mind, you know, you’re buying a house for, let’s say half a million. There’s a 1% charge for stamp duty gone on there. So another 5,000.

It used to be six, seven, 8% back in the boom here. Uh, in the UK, they have a staggered and they, the agents I know over there are constantly crying that it’s too high and it’s affecting their, their house prices. But, you know, 1% negligible kind of really, you know, uh, six, 7% would be, would be heartbreaking, but you know, it’s not too bad.

So I think most people don’t moan about it. They understand

No, it’s kind of a, it’s a buried one. Like people give out about tax plenty in Ireland and probably rightfully so, but that one never gets any kind of, and it’s probably, as you say, cuz it’s 1%, but I suppose if you’ve paid some inheritance tax or gift tax on getting, you know, money together to buy a house, it’s just another tax that’s being paid after, you know, you’ve possibly paid the taxes we discussed earlier.

Uh, and then the only other one to consider really is the local property tax. And you’re gonna be on the hook for. For as long as you own the house, unfortunately. So the owner is liable for it. So if anyone is listening and they’re a tenant and you’re being asked to pay. Pushback. That should be the owner paying that one.

Uh, and yet the local property tax look, we all pay it. Um, all, all homeowners pay it and it’s based on the value of the house. Uh, and, and whereabouts in the country it’s located.

Been brilliant. I think you’ve given everyone such a comprehensive Not only are the taxes involved, but also, you know, how to, to put money uh, whether it’s gifts or, or whatever to, to buy a house.

So I really appreciate you coming on at the show and, uh, where can people find you if they want your

Yeah, pleasure to be here. Thank you for having me on. And if anybody needs to get in touch or has a question on anything that came up today, uh, please contact me. Uh, the website is www.cloud accounts.ie, or on Instagram. It’s at cloud accounts Ireland. And I’ll get back to you on all questions. There’s I haven’t heard before, so, so please do ask them.

B I have to say your questions on there. And you’re doing regular sort of updates and, and, uh, videos and things explaining things to me, you know, that is for me, I’m finding very helpful. So everyone else should go give you a follow. Talk to you soon.

Much. You appreciated.

Welcome back, and now it’s time for our in, out and away feature. Each week we are comparing a different area and a property price range to see what you can afford and what your money can buy you. This week we’re getting out of Dublin and we’re gonna. I’ve looked at an inner city property in Cork City Center, a second on the outskirts, and a third some distance from Cork City Center on the South Coast. We have picked the 📍 price range of 250,000 euros.

We’re looking for something entry level, starter home, uh, that you should be able to afford around Cork City Center and the surrounds

First up, our in for this week is one Drew’s Terrace, Evergreen Street. This is right in the heart of Cork City Center. It’s on the market for 245,000. It’s an end of Terrace red Brick two story house. It’s three beds and one bathroom, and it extends to 55 square meters, so quite small.

For that price. It’s in surprisingly good condition inside nice kitchen, nice cozy living room. Uh, upstairs, a couple of small bedrooms. None of them are 📍 particularly big and the back garden is only a small courtyard,

But you’re right in the heart of the city center, your two streets back from the river Lee. This is a great central location you could turn this property into a lovely 📍 home.

next for our out property this week, we haven’t gone that far. Actually, it’s only about three miles from the first in property. This is 14 Mount Pleasant Avenue and just shows actually COR has some fantastic value for money. There is a range of areas and different property types all within the 📍 city bounds.

You can actually afford something quite interesting there. This is a four bed semi attached family home.

Now it is in poor condition. Inside it looks like it’s something from the sixties or seventies in the kitchens, bedrooms, and living rooms. But structurally, it looks sound, and 📍 this could make a fantastic family home.

Unlike the in property, this has a fabulous back garden. It’s probably about 50 foot long. It’s only a B E R G rating, so it will need some upgrades, but for 250,000, a four bed, two bath house, this is a great buy

📍 Finally for a way, we’ve got out of Cork City and headed straight for the coast. This is Cliff side on the Coast Road in Myrtle. It’s on the market for 250,000 euros. It’s a three bed house, two baths, and it’s rated D one,

so it’s not 📍 in such bad order.

Inside is a little dated, but you could really upgrade this into a fabulous family home, and it’s on the cliff overlooking the coast. This could be a wonderful location for anyone wanting and able to work from home. You could be right on the coastline. You’re, you are half an hour into co city, but look, you have the 📍 wilds of the South Coast here on your door.

So which would you choose this week? Great value for money in cork, uh, in is a three bed red brick terrace with little garden. Out is only a little bit further away in the suburbs.

It’s a four bed house with a great garden, but in need of work. And finally, our way is in Myrtle on the coast. Beautiful potential for this three bed house. Tell me the comments in our social media and vote, which one you would choose.

So for new home versus old home this week, I’ve picked some fun choices here. Both are in towns just 20 minutes away from cork. 📍 Uh, the first, our new home is in Kilworth, which is just outside for Maui. This this is just 20 minutes up, the eight from Cog.

The scheme is called Monterey, and these are two, three or four bed family homes newly built and gonna be finished in February, 2023.

Prices start for 285,000 euros. That’s probably for a two bed and up to 325,000 for a four bed.

These are gonna be highly energy efficient. A-rated homes with airto water, heat pumps under floor heating, and finished a really, really high standard

kilworth, seems a lovely little town with a playground nearby, a school of its own and an easy commute into Famor, into cork itself.

Now 📍 our old home this week. Now this may not be a direct comparison, but we found this in Macroom just about 20 minutes. The other way from co this is called Fred’s Bar. It is a old pub, a license premises on the market for 250,000 Euros.

Has a full pub downstairs and three beds.

And to the rear, there’s a large yard and outbuildings. This seems a lovely, traditional local Irish pub.

You could either restore it to its former glory and live upstairs, or perhaps you take the whole building and convert it into a quirky, modern home that’s on the market for 250,000 euros. That leaves you some change left over. Uh, if you’re comparing this to the new homes there to bring it up to a standard.

So which would you prefer? The brand new A-rated homes in FAO or the old pub that you could bring up into a new era? Tell me in the comments on our social media, which one you would choose.

📍 So now to our final news stories this week, it was the budget 2023. So there’s a lot of property content in there that’s 📍 dominating the headlines. First of all, there’s gonna be a lot more money going into social and affordable construction. That is great. We need a lot more construction of homes for all aspects of the state.

However, it’s still not enough and they couldn’t even spend how much they budgeted for last year

partly due to the lack of initiative, partly due to the lack of available builders, et cetera, to build all these homes.

The government have also expanded the amount of money they’re spending on hap that’s a housing assistance payment that helps private renters, , afford the high rents in the country at the moment. that is a budget that is ballooning and it is inflating the cost of rents across the nation. Uh, it is something that they can’t really get out of right now, but building more homes with help to alleviate that and get people outta private rental.

Secondly, good news for new homes buyers. The help buy scheme was extended again, as we hoped. You can now use the help Buy scheme to get up to 30,000 euros towards the deposit for a new home. Uh, you can use it on top of the first home shared equity scheme as well if you’d like.

there’s nothing really there in the budget for buyers of secondhand homes, although a few months ago we did get a new scheme, which would help you fund up to 50,000 euros for refurbishments of a, an old home, a derelict home, or a house in bad condition.

There is a little relief for Hard Press 📍 renters out there. There’s gonna be a tax rebate of 500 Euro this year and another 500 euro available for next year, which would help alleviate, you know, half a month’s rent for some people if that.

It’s a little bit of a help, but it’s not gonna make a huge dent, uh, especially when energy bills this year are gonna be so high that could be wiped out in one.

Speaking of energy bills, we are all gonna get 600 euro in a rebate for that as well. Uh, there’s gonna come, I think in three, 200 euro installments. Again, that’s some help. That will be a relief to take a bit of the edge off the high bills that we’re expecting this winter.

📍 The government have also sought to put in a vacant property tax, uh, to try and stop people hoarding land or sitting on land that is not being used productively, unfortunately, hasn’t gone far enough. It’s going to be three times the property tax for a property that could be a matter of a few hundred euros, or even a few thousand euros or 10,000 euros for a bigger site.

It’s not gonna really make a big dent in some of these big developers who are sitting on a hat land that could be used, and it may not even affect people who have a, an old derelict. That is just sat there, they’re doing nothing with.

There are also some exemptions, like if you’re trying to sell or rent the land at the moment, uh, that could leave to a lot of loopholes for people to get out as well. 📍 Finally, one last thing. The government have attempted to solve the Micah Concrete Block Scandal by putting a levy on all concrete products.

Um, that’s great, but it’s only gonna increase construction costs that are already very, very high at the moment. Uh, a lot of people in the industry are annoyed by this and it doesn’t really go to tackle those already affected by the micro crisis in the last decade or so.

That’s it for the news this week. Thank you for tuning in. We’ve covered savings and mortgages. Now next week we’re gonna be launching into the house hunting process, and I’m gonna be taking you through my basic tips to get started. When you’re looking for a home tune in, please subscribe and please follow us on social media at Irish Home Magazine.

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