Gifting A Mortgage Free Rental Property

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    Gifting A Mortgage Free Rental Property

    I'm thinking of 'gifting' a mortgage free property to one of my children. Property value isn't huge, but if I gift the property now, will I have to pay CGT on the 'gift'? Will my adult child have any taxes to pay on receiving the gift?


    I wondered if there is not any CGT for myself, assuming I live for just another year, its my thinking the gift still comes under my estate and IHT is would be due (but no CGT?).

    I am trying to decide if I should just leave property in my name and my estate pays the IHT when I go. I don't like the idea of paying double tax, ie, cgt now and then my estate gets hit with a further 40% IHT in another 12 months or so.

    #2
    Gifting the property will be a disposal for CGT for you.
    It's an SDLT event also.
    But it's outside your estate for IHT after 7 years.

    If it's part of your estate, IHT is due, but no CGT or SDLT.

    One hidden plus of property IHT is that it's usually possibly to spread/defer the payment for a period - often a number of years.

    Usually, the result that benefits to owner best benefits the potential giftee least, and vice versa!!
    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).

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      #3
      Assuming I live the next 5 years or so, could I gift a percentage of the property, to the value of my annual CGT until I no longer own said property? Obviously rental income would be declared by both myself and adult child.

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        #4
        Originally posted by Smudgie View Post
        Assuming I live the next 5 years or so, could I gift a percentage of the property, to the value of my annual CGT until I no longer own said property? Obviously rental income would be declared by both myself and adult child.
        You're moving a bit close to actual tax advice here, which you need to be qualified to give.

        In theory, yes, that would work.

        You need to be very careful about continuing to receive a benefit from something you gift, because it can backfire for IHT.
        You (or your executor) would have to be able to show that the income and expenses were perfectly aligned with the owning shares.
        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
          Not looking for advice - just wondering if it's feasible before making an appointment for professional advice. Have just found an article in The Times. It certainly looks complicated and just so many other risks to consider once the property is no longer mine.

          https://www.thetimes.co.uk/money-men...-implications/

          Comment


            #6
            The Nil tax band for inheritance is £325K plus £175K for family home if left to children or grandchildren = £500K .

            Any amount above will be charged at 40% for iht.

            If the gift property is not your home and the property is an asset sitting above the £325K level , then if you dispose the property now by gifting to a child , you may have a taxable capital gain and pay tax charged at 18% or 28%.

            But there is an annual capital gains personal allowance of £12,300 which is deducted before the tax is charged.

            So for example , if the capital gain is £30,000 , then you deduct £12300, and pay tax on £17,800 at 18% = £3200 approx. The child who receives the property does not pay tax for receiving the property .



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