Conversation one: with yourself, about losing it
The oldest rule in family lending still leads: never lend what you cannot afford to see vanish. Not because relatives are dishonest — overwhelmingly they are not — but because life is undefeated. Redundancies, breakups and illnesses do not consult repayment schedules. If losing the sum would damage your retirement or your sleep, lend less, or gift a smaller amount instead, and say so warmly.
Conversation two: the word itself
In the same sitting, both of you should say the actual word — loan — and hear the other person say it back. An astonishing share of family money disputes trace to two people who each left that conversation with a different noun in their head. English courts, when these disputes surface, look first for evidence of what was intended; a sentence in writing outweighs a decade of assumptions.
What judges start from when nothing was said
Two English cases are quietly reassuring for lenders. In Seldon v Davidson [1968] 1 WLR 1083, the Court of Appeal held that when money is shown to have been handed over and the recipient claims it was a gift, the burden of proving the gift falls on the recipient — the natural starting inference is a loan, repayable. And in Chapman v Jaume [2012] EWCA Civ 476, substantial payments made toward a partner’s house were treated as repayable in the absence of evidence they were meant as anything else. The law leans your way — but “leaning” still means a courtroom argument about intentions. The written word in a short agreement is what makes the leaning irrelevant.
Conversation three: numbers with dates attached
An amount, a transfer date, and a repayment pattern made of calendar dates — monthly figures a payslip demonstrably survives, or one settlement date if that’s the plan. Include the awkward clause while everyone is fond of each other: what happens when a payment is missed (if it ever does, there’s a right order to responding). Modelling instalments first with the loan interest calculator takes thirty seconds. A short grace period suits most families; larger sums sometimes warrant the whole balance becoming callable. Deciding this in advance is a gift to your future selves.
Conversation four: the ten-second tax check
Lending itself triggers no UK tax. Charging interest makes what you receive taxable savings income in your hands — one line on a return, often covered by allowances — and most family lenders simply charge nothing, which is entirely lawful — the full HMRC picture is shorter than you’d think. If the sum is large and estate planning is in play, note that an outstanding loan remains an asset of your estate, which is frequently exactly what you want for evenness between children.
Conversation five: the one you have with a document
Everything above condenses into a short signed agreement: parties, amount, dates, interest position, missed-payment rule, and the loan-not-gift declaration. Send the money by bank transfer with the agreement’s reference attached, set up the standing order, and let paperwork do what nagging otherwise would. The builder drafts the whole thing in about four minutes. The families who write it down are the ones who never mention it again.