GIFTING property and tax?!?!?
Discussion
Hi All,
My dad suggested he is thinking about gifting his BTL property to me and has asked me to start the research on what happens regarding:
Inheritance tax
Capital gains
Anything else I or he should be thinking about
So I understand that he must survive 7 years after the gift for me to be exempt from IH but what about CG tax?
What else should I be thinking about?
If he gifts it to me, can I then re-mortgage it and release some equity?
IceBoy
My dad suggested he is thinking about gifting his BTL property to me and has asked me to start the research on what happens regarding:
Inheritance tax
Capital gains
Anything else I or he should be thinking about
So I understand that he must survive 7 years after the gift for me to be exempt from IH but what about CG tax?
What else should I be thinking about?
If he gifts it to me, can I then re-mortgage it and release some equity?
IceBoy
I didn't think you could 'gift' property like this?
To my understanding, if it's not part of an inheritance, then then house will still be 'sold' to you. As it will in theory be sold at a value of £0, no Capital Gains should be due as he's effectively lost money.
However I'm not sure if selling a house for £0 is as clear cut as that. There would surely still be some legal and official fees, but I don't know if there are other implications. Can't see why it would too difficult though, it can;t be an uncommon situation..
To my understanding, if it's not part of an inheritance, then then house will still be 'sold' to you. As it will in theory be sold at a value of £0, no Capital Gains should be due as he's effectively lost money.
However I'm not sure if selling a house for £0 is as clear cut as that. There would surely still be some legal and official fees, but I don't know if there are other implications. Can't see why it would too difficult though, it can;t be an uncommon situation..
Worth taking some proper advice as this could get complex and frankly I would take anything and everything written on a motoring forum with a pinch of salt, including what I'm writing here. For example, almost everything that Smithy has said is wrong 
For reference, I am not remotely qualified to offer any of the following advice.
You can absolutely gift a house, and the receiver will not have to pay CGT. Your dad however will do, as he is effectively realising any profit that he has made on the property.
For inheritance tax purposes, this is a potentially exempt transfer which, simply put, means that IHT is payable if your dad dies within seven years.
Stamp duty isn't normally payable, but there are some mildly complex rules around mortgages that means it might apply in some circumstances.
Like I say...for the sake of a few hundred quid you are best off getting somebody qualified to take a look at all the circumstances and offer some tailored advice on this.
For reference, I am not remotely qualified to offer any of the following advice.You can absolutely gift a house, and the receiver will not have to pay CGT. Your dad however will do, as he is effectively realising any profit that he has made on the property.
For inheritance tax purposes, this is a potentially exempt transfer which, simply put, means that IHT is payable if your dad dies within seven years.
Stamp duty isn't normally payable, but there are some mildly complex rules around mortgages that means it might apply in some circumstances.
Like I say...for the sake of a few hundred quid you are best off getting somebody qualified to take a look at all the circumstances and offer some tailored advice on this.
As deckster says get proper paid for advice. CGT is payable on the transfer, IHT MAY be payable if he dies within 7 years, income tax will be payable at your marginal rate on the income you get from the property, look into putting the property into a limited company but get specialist advice on that as it may not be beneficial.
And what do you mean by "gift"? The gift has to be given completely free of any beneficial entitlement by your father to the property - including use of the property - unless he pays full market rent.
If he does retain use of the property in any way and doesn't pay full rent for it, YOU will be assessed on the rental income you WOULD have received if you were actually receiving full market rent.
If he does retain use of the property in any way and doesn't pay full rent for it, YOU will be assessed on the rental income you WOULD have received if you were actually receiving full market rent.
You mention remortgaging; if the property has a mortgage on it currently then that needs to be paid off to transfer title. Unless your dad has sufficient money to pay it off completely in advance, I imagine you'll be taking out a mortgage in your own name to repay it. In that case, it's not really a gift; you're paying him the amount of the outstanding mortgage.
Do get some proper advice.
Do get some proper advice.
Eric Mc said:
And what do you mean by "gift"? The gift has to be given completely free of any beneficial entitlement by your father to the property - including use of the property - unless he pays full market rent.
If he does retain use of the property in any way and doesn't pay full rent for it, YOU will be assessed on the rental income you WOULD have received if you were actually receiving full market rent.
OP seems to be saying it's his Dad's BTL property, not his primary residence.If he does retain use of the property in any way and doesn't pay full rent for it, YOU will be assessed on the rental income you WOULD have received if you were actually receiving full market rent.
CGT is generally charged on "disposals" not just on sales and the tax is based on the "market value" at the time. [Normally if you sell something on the open market the price received IS the market value. Otherwise you need an independent valuation.]
Yes, properties can definitely be "gifted".
IHT is also, where applicable, calculated by reference to the market value at the time of the gift.
The interaction (or not) of CGT and IHT is fairly complex so professional guidance is strongly recommended. You'll probably be using a solicitor to document the gift and title transfer so make sure you get the tax fully reviewed at the same time.
Yes, properties can definitely be "gifted".
IHT is also, where applicable, calculated by reference to the market value at the time of the gift.
The interaction (or not) of CGT and IHT is fairly complex so professional guidance is strongly recommended. You'll probably be using a solicitor to document the gift and title transfer so make sure you get the tax fully reviewed at the same time.
deckster said:
Worth taking some proper advice as this could get complex and frankly I would take anything and everything written on a motoring forum with a pinch of salt, including what I'm writing here. For example, almost everything that Smithy has said is wrong For reference, I am not remotely qualified to offer any of the following advice.
You can absolutely gift a house, and the receiver will not have to pay CGT. Your dad however will do, as he is effectively realising any profit that he has made on the property.
For inheritance tax purposes, this is a potentially exempt transfer which, simply put, means that IHT is payable if your dad dies within seven years.
Stamp duty isn't normally payable, but there are some mildly complex rules around mortgages that means it might apply in some circumstances.
Like I say...for the sake of a few hundred quid you are best off getting somebody qualified to take a look at all the circumstances and offer some tailored advice on this.
^^ This. For reference, I am not remotely qualified to offer any of the following advice.You can absolutely gift a house, and the receiver will not have to pay CGT. Your dad however will do, as he is effectively realising any profit that he has made on the property.
For inheritance tax purposes, this is a potentially exempt transfer which, simply put, means that IHT is payable if your dad dies within seven years.
Stamp duty isn't normally payable, but there are some mildly complex rules around mortgages that means it might apply in some circumstances.
Like I say...for the sake of a few hundred quid you are best off getting somebody qualified to take a look at all the circumstances and offer some tailored advice on this.
You are a connected person with your dad for CGT purposes. Any gift is subject to tax based on the market value of the property. Your tax basis for any future disposal by you will be the MV.
IHT and SDLT as above.
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