Shared ownership of BTL
Discussion
Hi The wife and I have joint ownership of a BTL which we want to pass to my daughter and her husband in the most cost effective way. There is approx £40k equity in the property which we have owned it for 5 years. We could simply pass ownership to them but I understand that we would be hit with 2nd home ownership stamp duty and possibly some capital gains. Been told that we could make them part owners with ourselves which would avoid any cash penalty . Not sure what happens if we die. Any ideas please.
There is no Stamp Duty on gifts.
You can't just "give away" a mortgaged property. You'll need to get the finance company fully on board and resolve the inevitable issues. Put at the simplest, will your daughter be able to get a mortgage on the BTL?
Which brings us back to Stamp Duty - because if they need a new mortgage to pay off your old mortgage then that money will effectively be the price paid for the house and if it's over £125k Stamp Duty will then apply on that price.
You can't just "give away" a mortgaged property. You'll need to get the finance company fully on board and resolve the inevitable issues. Put at the simplest, will your daughter be able to get a mortgage on the BTL?
Which brings us back to Stamp Duty - because if they need a new mortgage to pay off your old mortgage then that money will effectively be the price paid for the house and if it's over £125k Stamp Duty will then apply on that price.
What's the reasoning behind wanting to pass it on now?
If they already own a house then there will be stamp duty to pay on the amount of mortgage required and as already alluded to, you can't simply gift a whole property over that has an existing mortgage. You'd need either the lenders permission/agreement or for your daughter and husband to apply for their own directly.
Even if you make them part owners with yourselves, if they already own a house then they'all have to pay some stamp duty as it'all be their 2nd property.
Depending on their income it may even make more sense for you to keep it running and "gift" them regular sums of money.
If they already own a house then there will be stamp duty to pay on the amount of mortgage required and as already alluded to, you can't simply gift a whole property over that has an existing mortgage. You'd need either the lenders permission/agreement or for your daughter and husband to apply for their own directly.
Even if you make them part owners with yourselves, if they already own a house then they'all have to pay some stamp duty as it'all be their 2nd property.
Depending on their income it may even make more sense for you to keep it running and "gift" them regular sums of money.
terrydacktal said:
rockin said:
Which brings us back to Stamp Duty - because if they need a new mortgage to pay off your old mortgage then that money will effectively be the price paid for the house
Not true! How would you explain the kids, say, borrowing £100,000 and then giving it to the parents so they can pay off their mortgage? It's very obviously part payment for the house. The element of "gift" is limited to the parents equity.
The situation would be different if the parents paid off the mortgage from their own resources and then gave the house "free and clear" to the kids but that is not what the OP has proposed. He seems only to be talking about a gift of the £40k equity.
Hi more Thanks for all the replies. I should have been more detailed in my post. We currenty have a morgage on the property which we could clear prior to handing over the property, if that what we want to do. My daughter would then take out a BTL morgage.
Would doing this attract capital gains and stamp duty.
Would doing this attract capital gains and stamp duty.
stuartdenton said:
Hi more Thanks for all the replies. I should have been more detailed in my post. We currenty have a morgage on the property which we could clear prior to handing over the property, if that what we want to do. My daughter would then take out a BTL morgage.
Would doing this attract capital gains and stamp duty.
You need to speak to an accountant who is well-versed.Would doing this attract capital gains and stamp duty.
My understanding is that gifting a SECOND, MORTGAGE-FREE property to children would attract capital gains on that £40k you made. I'm not sure who values the property in this scenario, but you cannot just pick a value that suits you (i.e. the price you paid for it)
.HOWEVER, to minimise CGT you can part-gift. This means you sign over a share of the property to your offspring, and you and your wife still have an interest in the property. Over the next 4-ish years (depending on the valuation and other capital gains you might make elsewhere) you gift a bit more of the property until your daughter has full control. The benefit of this is that so long as you stay below the £11k-ish CGT threshold, you can avoid paying the tax.
If there's no mortgage, then neither you nor your daughter need to pay SDLT.
Eric Mc said:
HMRC has very strict rules about splitting an asset in order to keep the gains below the allowance or other thresholds. They are called the Part Disposal rules and generally don't allow you to do what you have suggested.
Didn't know that, thanks.OP - Speak to a property accountant!
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