Why parent-to-child money needs the label
Courts in England and Wales start from evidence — and in some parent-to-child situations, equity can presume the transfer was a gift (the old presumption of advancement) unless there’s evidence it was a loan. That presumption is exactly backwards from what most lending parents intend. A signed agreement stating loan, not gift, with a repayment schedule attached, is the evidence that settles it.
Estate planning, quietly
A loan still outstanding when you die is an asset of your estate: your executor can collect it, or set it against that child’s share so the siblings come out even. A gift is different planning entirely — it starts the seven-year inheritance-tax clock and leaves the ledger to memory. Recording which one you meant is a kindness to your executor and to the children who’ll sit across a table from each other one day.
Example: £25,000 and three children
Helen lends her middle child £25,000 toward a flat. The agreement fixes £300 a month and states plainly that it’s a loan. Years later, whatever remains unpaid is simply set against his share of her estate — and his brother and sister never have to wonder, or ask, or argue about what that money was.
The pattern repeats across every family: it’s rarely the borrower who minds the paperwork — it’s the siblings who mind its absence.
What the agreement should pin down
- The amount and the date the money moves — with a payment reference on the bank transfer so the advance is provable.
- The repayment plan — instalments or a single date, and what happens if a payment is missed.
- Interest, if any. There’s no statutory cap between family members; the builder warns (never blocks) at 25%+. Remember interest you receive is taxable income.
- Loan, not gift — stated in terms. It protects the borrower’s siblings, the lender’s estate planning, and everyone’s memory.
- Signatures from both sides — electronic signing is valid in England and Wales, and it’s how LendRight finishes the job.
If repayment stalls
Money claims start online wherever you live — through Money Claim Online or the County Court Money Claims Centre — and claims up to £10,000 usually go to the small claims track, built for people without solicitors. If an in-person hearing is ever needed, it’s listed at a county court hearing centre convenient to the defendant, wherever in England and Wales they live. In practice, a signed agreement plus a bank record is usually enough to make the conversation end long before a courtroom.
Under the Limitation Act 1980 you generally have six years from a missed due date to bring a claim on a simple contract — one more reason the agreement should set real dates.
Scotland and Northern Ireland — a different story
If either of you lives in Scotland or Northern Ireland, the builder will tell you honestly that we can’t serve you yet — those are separate legal systems, and a template written for England and Wales isn’t automatically right there. Everything about that decision is on our coverage page.
Put it in writing — kindly.
Draft free in about 4 minutes. Pay the one-time £24.99 only when you send it for signing.
Create my loan agreement