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What’s the best way to contribute R1m to the purchase of a house in the UK for my child?

And am I able to have part ownership of the house, which may, as a secondary consideration, avoid donation tax?

I would like to contribute R1 million to the purchase of a house in the UK for my daughter and son-in-law:

  • What is the best way to go about this?
  • Am I able to have part ownership of the house, which may, as a secondary consideration, avoid donation tax?
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Thanks for sending your question through. To answer it, we will begin by discussing how getting the money to your daughter will work. As a South African, you can use your Single Discretionary Allowance (SDA) to move up to R1 million offshore per tax year. Your SDA does not require any tax clearance from the South African Revenue Service (Sars), although it is important to be aware of certain things which can use up your annual SDA, for example:

  • Purchasing offshore goods, for instance from Amazon and Alibaba;
  • Donating gifts offshore; and
  • Converting rands to offshore currency for an overseas holiday.

Therefore, provided that your bank can facilitate the transfer and you are sure that you have not used any of your annual SDA, you should be able to do a banking transfer into your daughter’s offshore bank account. There are service providers that can help to facilitate this process if your bank is not able to.

In answering your second question, please note that there are no rules or regulations prohibiting non-UK residents from owning property in the United Kingdom. As such, you are able to own a portion of the property equal to your R1 million contribution. While this would solve the donations tax issue, it is important to remember that if you own an asset such as a property in the United Kingdom, you may need to draft a foreign will to deal with that asset in the event of your passing.

Another important consideration would be the liquidity of your estate in the event of your death. Assuming that you would bequeath your share of the property to your daughter, should your estate not have sufficient liquidity, your daughter would need to pay into your estate in order to prevent the executors from attracting executor fees and potentially estate duty.

An alternative option should you not wish to own a share in the property would be to set up a loan account with your daughter. After sending the money to her, you can draw up a simple loan agreement at a 0% interest rate, while amending your will to ensure that the loan account is left to her in the event of your death. However, bear in mind that loan account would be an asset in your estate and will therefore attract executor fees and potentially estate duty. Each year, you can write off R100 000 of the loan using your donations allowance, thereby effectively reducing the potential taxes in the event of your death.

Do you have any questions you would like answered by registered financial planners?



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For once some good advice.

How does SARS treat the 0% loan in the hands of the lender?

Good question!

SARS will apply a deemed interest calculation for the 0% loan at the prescribed rate.
The prescribed rate is currently 4.50% (

The lender will therefore need to include a deemed interest income at the prescribed rate x loan amount. 4.50% x R1m = R45 000.

Practically speaking one would then use the donations tax annual exemption to then:
1. Offset the R45 000 (ie donate this gain back to the borrower – meaning it is no longer deemed income for the borrower)
2. Donate R55 000 of the capital on the loan to the borrower – reducing the capital of the loan amount over time.

**1. Offset the R45 000 (ie donate this gain back to the borrower – meaning it is no longer deemed income for the LENDER)

Thank you!

Not true. There is no deemed interest applicable in this situation as there is no service rendered by the recipient of the loan. You therefore need not worry about any tax consequences or donations tax consequences.

Also remember that just as Amazon purchases use up part of your SDA, so do birthday presents and other gifts use up your R100 000 annual donations exemption.

For R1m ( GBP 20000) just give your son a gift.
Average house price in a good area is GBP600000.

Better to give the (rand denominated) loan, which inflation will dissipate over time. A gift will require you to use donations tax exemptions that you may wish to use for other purposes – and R1m is far more than the annual R100k exemption anyway.

You should change banks and get a better rate ! (R50/GBP is extortionate…)

Is it sufficient to write in the loan document with a child that should the loan still exist at the time of the lender’s decease, that the balance still due will become part of the child’s inheritance? Or must it specifically be mentioned in the will? Thanks.

It’s unnecessary to put it in the loan agreement – in fact it probably has the capacity to confuse things. Rather keep use will for dealing with the distribution of all and any of your assets upon death. If your heir also has a liability to the estate, for example this loan, then if can be offset at final distribution. But rather leave it out of the loan agreement – for example you may wish to change your will. There isn’t any benefit in putting it the agreement at all.


You have a R1M discretionary Foreign Exchange allowance ,so just pay it into your Kids overseas Account and thats it : To hell with all the Donations Tax & /or Inheritance Issues :

End of comments.





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