Joint property inheritance vs gift

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    Joint property inheritance vs gift

    I brought a property in 2013 as btl with my dad (as I was unable to get mortgage on my own). After renting for just under2 years and some bad experiences decided to move in. I lived their til last year and moved out just under a year ago and re let it.
    Das never lived here. He was basically on the house for paper reasons. The mortgage has been paid off now. We own the place equally on paper. We want to now transfer the his share to me. However how not know what the best route to go would be to avoid tax. He will not pay any tax so any I will need to pay.

    The property brought for 100k now worth 250k.

    #2
    Are you joint tenants or tenants in common?
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Which of you in what proportion has been declaring, between you, ALL the rental income please? Is there a documented agreement about how rent income is split?
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        His raw gain will be 50% of (250k minus 100k). The rental income proportion agreed is not relevant to the capital gains calculation.
        He will not be entitled to lettings relief as it as never been his PPR.

        There is no easy way to avoid tax on transfer of the whole to you, although it could be dome gradually over few years to lower the tax.

        Inheritance tax would also (additionally) be payable on the gift unless he lives more than 7 years.

        Comment


          #5
          Originally posted by jpkeates View Post
          Are you joint tenants or tenants in common?
          If the property is owned as joint tenants, this would be much simpler.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            Originally posted by jpkeates View Post
            If the property is owned as joint tenants, this would be much simpler.
            I'm not sure how it does JP? Withdrawal of one co-owner is still a 50% transfer from the point of view of CGT. Likewise for inheritance tax.

            If it were that simple anyone could avoid CGT or inheritance tax, because, after all, any property held as TiC can be converted to joint tenants in about 15 seconds.

            Comment


              #7
              Originally posted by AndrewDod View Post
              If it were that simple anyone could avoid CGT or inheritance tax, because, after all, any property held as TiC can be converted to joint tenants in about 15 seconds.
              I meant that there'd be the option to do nothing and let time and nature sort out the transfer.

              For IHT purposes joint tenancy is already a good avoider - survivorship kicks in and the property isn't part of the deceased's estate.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Originally posted by jpkeates View Post
                I meant that there'd be the option to do nothing and let time and nature sort out the transfer.

                For IHT purposes joint tenancy is already a good avoider - survivorship kicks in and the property isn't part of the deceased's estate.
                I don't think that's right JP. It is not part of the estate of the deceased from the point of view of some aspects of probate (whatever it says in the will it will pass to the other owner). To that extent it "bypasses" probate. However it *is absolutely* still part of the estate from the point of view of inheritance tax.

                Likewise for a joint bank account - probate is not required for the other person to take over the account, but it not tax free

                See for example

                https://www.taxationweb.co.uk/tax-ar...r-spouses.html

                https://www.gov.uk/hmrc-internal-man...nual/ihtm15031

                https://www.gov.uk/hmrc-internal-man...nual/ihtm15032

                https://www.boodlehatfield.com/the-f...e-money-is-it/

                Comment


                  #9
                  Originally posted by jpkeates View Post
                  I meant that there'd be the option to do nothing and let time and nature sort out the transfer.

                  For IHT purposes joint tenancy is already a good avoider - survivorship kicks in and the property isn't part of the deceased's estate.
                  I don't think that's right JP. It is not part of the estate of the deceased from the point of view of some aspects of probate (whatever it says in the will it will pass to the other owner). To that extent it "bypasses" probate. However it *is absolutely* still part of the estate from the point of view of inheritance tax.

                  Likewise for a joint bank account - probate is not required for the other person to take over the account, but it not tax free

                  See for example

                  (post unapproved as 4 links provided)

                  Comment


                    #10
                    You're right.
                    Brain fart by me.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      How old is Dad and is he in good health? What other assets might he leave you on death? His gain is currently £75k. Capital gains tax exemption is £12k so he could transfer it to you in £12k chunks. If Mum is still in the picture he can gift half his interest to her and they can both gift you £12k worth. He can only gift you £3k a year free of inheritance tax so IF his estate is large enough for inheritance tax to be due and IF he doesnt survive 7 years you'd have an IHT billl. .

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