Tax on rental income - liability on landlord or owner

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Tax on rental income - liability on landlord or owner

    I have a property in London which has been my home for many years, but has been rented out for the last 2 years after I moved to live abroad in retirement. Now I would like to gift the property to my daughter in order to reduce inheritance tax when I pass on, but I will continue to receive the rental income on the property directly into my bank account. The question is, whether HMRC view that the tax due on the rental income is a liability on my daughter as the owner or on me as the landlord?

    #2
    If you gift the property to your daughter, the rental profit should be paid into her bank account and reported in her tax return.

    If the rental income is paid into your bank account, the tax office may consider you are still the owner of the property.

    The iht free allowance is now £325K or or up to £500K if the family home is left to children.

    Comment


      #3
      Read about GROB. No you can't do this.

      And actually you will have no say either if 5 years down the line your daughter herself decides to sell it or take the income. Or if she gets divorced and her ex partner decides to do that.

      Comment


        #4
        If you gift the property to your daughter it will be a sale for tax purposes and SDLT will be payable by your daughter based on the market value of the property.

        If you continue to receive the rental revenue, it probably won't be a transfer out of your estate. You can't gift it and enjoy any non-trivial benefit from it.

        What you need is legal advice (UK based) and they will probably recommend a trust to avoid the IHT issue and the possibility of your daughter selling the property or dying.
        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


          #5
          Thanks both, I had a feeling that my be the case. What is GROB?

          Comment


            #6
            Ok, thanks all, just googled it.

            Comment


              #7
              Originally posted by jpkeates View Post
              If you gift the property to your daughter it will be a sale for tax purposes and SDLT will be payable by your daughter based on the market value of the property.

              If you continue to receive the rental revenue, it probably won't be a transfer out of your estate. You can't gift it and enjoy any non-trivial benefit from it.

              What you need is legal advice (UK based) and they will probably recommend a trust to avoid the IHT issue and the possibility of your daughter selling the property or dying.
              No SDLT is payable on gifts provided there is no mortgage associated. Seller may pay CGT however depending.

              Comment


                #8
                Originally posted by AndrewDod View Post
                No SDLT is payable on gifts provided there is no mortgage associated.
                You're right.

                I'd decided it wasn't really a gift and ignored the zero value.
                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


                  #9
                  If the rental period was only 2 years compared to many years of own residence, the capital gain under the rental period is only 1.5 years . This capital gain less the £12,500 capital gains allowance leaves a small taxable capital gains bill.

                  Comment


                    #10
                    Is CGT due on a gift? When my daughter sells the property her profit will be the whole value of the property (unless she nominated it as her main home)?

                    Comment


                      #11
                      Yes. The cgt is charged on the capital gain during the "letting period" which you say is 2 years.( but reduced by 9 months ). You may need a valuation of the property from a RICS surveyor before you act..

                      When your daughter sells, her capital gain will be calculated from the future sale price minus market value at receipt of gift or nil if used as main residence.

                      You should consult a professional tax advisor before you proceed as I am not qualified to give advice.

                      Comment


                        #12
                        But there is no gain or profit if it is a gift?

                        Comment


                          #13
                          The gifting game is played under the taxman's rules.

                          A gift of property to daughter or non-relative is still a disposal subject to capital gains tax. A gift of property between spouses is not liable to capital gains tax.

                          Comment

                          Latest Activity

                          Collapse

                          • Limited or not....
                            by ZIGGYVIGGY
                            Dear All

                            Need advise on the following
                            • Funds stuck in Limited Company waiting to be invested.
                            • Question - Will the Limited Company "that has never held a Property" be made liable for SDLT on its first purchase (I am the sole director and personally hold 1 BTL and 1 main)
                            • If
                            ...
                            11-08-2020, 22:33 PM
                          • Can't work out CGT
                            by thecrazy1
                            Hello all! This is my first post and I need your help.

                            I have been trying to work out the tax on a property gain. Here are my calculations.
                            Inherited the house (property B) in 1997 which is opposite the house (property A) I lived in with my wife. From 1997 - 2000 i stayed in property...
                            11-08-2020, 15:51 PM
                          • Reply to Can't work out CGT
                            by Gordon999
                            What is your annual income from your job ? are you paying 20% or 40% tax on income ? .

                            The capital gains tax is 18% or 28% and capital gains allowance ( tax free ) is £12,500.


                            If you lived in property B for 8 years , you should be able to claim 8 years plus 9 months...
                            11-08-2020, 18:35 PM
                          • Reply to Can't work out CGT
                            by jpkeates
                            First of all, you only need to nominate a property if you live in more than one property at the same time.
                            Someone who works in one place and spends weekends somwhere else would normally want to do that so there's no doubt which is their main residence.

                            From the sound of it, you were...
                            11-08-2020, 18:06 PM
                          • Can I Rent My Private BTLs to my own Ltd Company?
                            by Crunchie
                            I own 5 buy to let HMOs in my private name with mortgages and have to pay the higher rate of income tax. My properties are my only source of income.

                            Can I set up a Ltd Company and rent my properties to it for a rental that is less than the higher rate tax band, say £45,000 total? The tenants...
                            09-08-2020, 20:25 PM
                          • Reply to Can I Rent My Private BTLs to my own Ltd Company?
                            by Gordon999
                            I think your mortgage lender will object to renting of your BTLs to a company.

                            But there is nothing to stop your company providing annual inspection and maintenance service to your flats ( 5 years external painting and internal decoration ) etc and charging a profit for the service.
                            11-08-2020, 08:30 AM
                          • Reply to Can I Rent My Private BTLs to my own Ltd Company?
                            by theartfullodger
                            Hopefully chancellor will tighten up some of this sort of tax fiddling schemes.

                            Taxes need to go up to pay for covid19 & Brexit
                            10-08-2020, 09:02 AM
                          • Reply to CGT evidence
                            by jpkeates
                            AndrewDod is right, the extension sounds like a capital item, but the refurbishment of the property itself probably isn't.
                            And, for all the work done while you were living there, there's no tax allowance against income....
                            10-08-2020, 08:58 AM
                          • CGT evidence
                            by PaulRs1
                            Hi All,

                            I’m an accidental landlord and about to sell the house. Lived in it for 4 years and rented it out for 6 (with the intention of moving back, which never happened)

                            im aware I need to pay CGT and can claim improvement costs, I basically bought a wreck and renovated it...
                            08-08-2020, 13:25 PM
                          • Reply to Can I Rent My Private BTLs to my own Ltd Company?
                            by jpkeates
                            There are two obstacles.

                            There's nothing specifically where HMRC says that you can't let properties to your company at below market rate, but it would probably fall foul of the general anti-abuse rule, because the arrangement exists entirely to reduce the amount of tax you pay - there is...
                            10-08-2020, 08:55 AM
                          Working...
                          X