Gifting a house to a child

[Countdown]

A friend of mine is planning on gifting a house (which is currently a tenanted BTL property) to his eldest daughter as a wedding gift. The plan is that either they move in or they just carry on renting it out whilst living somewhere else.

Are there any CGT issues? Are there any other downsides of doing this?

[markiii]

think its just the 7 year rule

[Eric Mc]

Who will be receiving the rental income after the property is "gifted"?

[Somebody]

There will be CGT as it's a BTL property.

[Drew106]

Since the property is not their main property (i.e. an investment/second property), then I believe CGT will be payable on any gain, had the property been sold at market value.

I think there may be a way to defer this over to the receiver of the gift, but I'm not 100%.

[JulianPH]

Somebody said:

There will be CGT as it's a BTL property.

Not if it a PET gift and the parent survives for 7 years having mad it.

As Eric says, the income (if they continue to rent it out ) is a different matter.

I trust you are in good spirits Eric. Great to see you back on here

[deckster]

If there is a mortgage on the property then SDLT becomes payable.

[Countdown]

Thanks folks

She would be getting the income post-nuptials.

Good point about the SDLT - fortunately no mortgage!

The house is currently in Joint names - how does that affect the 7 year rule?

[superlightr]

JulianPH said:

Somebody said:

There will be CGT as it's a BTL property.

Not if it a PET gift and the parent survives for 7 years having mad it.

As Eric says, the income (if they continue to rent it out ) is a different matter.

I trust you are in good spirits Eric. Great to see you back on here

Whats a PET gift?

I thought that IHT wont apply if donor survives 7+ years. I thought CGT applies on the sale/transfer at market value less purchase price irrespective of if a gift or not. Please enlighten me my brain is fuzzy.

[A500leroy]

how easy is it to gift a house to someone?

[dazwalsh]

just to add a bit more meat to the bone, if the people who are gifting the property have previously lived there, despite it being a btl for a number of years does that remove the capital gains out of the equation?

[Drew106]

superlightr said:

Whats a PET gift?

Potentially Exempt Transfer.

superlightr said:

I thought CGT applies on the sale/transfer at market value less purchase price irrespective of if a gift or not. Please enlighten me my brain is fuzzy.

I thought this as well, but looking into it a bit further I'm not sure. Looks like if the transfer is considered a PET, then no CGT will be payable unless they die within 7 years.


I'm actually in a similar situation to the OP at the moment, so have been looking into it. But it's not a straight forward subject.

I have another question I'm trying to find the answer to,
If the house is transferred by way of a gift, then the beneficiary of the house sells it on, what would be the tax implications here?

[springfan62]

CGT is payable on all gifts as if it were a disposal at market value.

The only exceptions are ones own residence and cash.

A PET is only relevant to the IHT element it does not affect CGT.

[springfan62]

Drew106 said:

I have another question I'm trying to find the answer to,
If the house is transferred by way of a gift, then the beneficiary of the house sells it on, what would be the tax implications here?

The CGT cost to them is the market value at the time of transfer, if they live in then there would be no further CGT liability but if they let it out it would become liable for CGT on disposal for the excess over the market value when transferred to them.

[anonymous-user]

It looks as though there's some confusion.

Yes, it's easy to gift a property. All that's needed is the filing of an appropriate Transfer at the Land Registry.

• Gifting a BTL will trigger a potential CGT charge. The amount of tax, if any, will depend on the property's history and the donor's overall tax position.
• Gifting a BTL will trigger the IHT regime but tax will only be payable if the donor dies within the following 7 years. The amount of tax, if any, will again depend on the donor's overall tax position. If the donor's estate had insufficient assets to pay the tax the recipient of the gift could have to pay it.

Paid professional advice is definitely recommended for anyone thinking of doing this.

[Countdown]

Cheers Rockin

Is this the form that needs to be filled in?

[Scootersp]

<cynic downer mode engaged> remind your friend he's gifting 50% to his Daughter and 50% to his new son in law.......

[Countdown]

Scootersp said:

<cynic downer mode engaged> remind your friend he's gifting 50% to his Daughter and 50% to his new son in law.......

I do believe that may have come up in conversations between him and his wife

[Alpinestars]

Countdown said:

Thanks folks

She would be getting the income post-nuptials.

Good point about the SDLT - fortunately no mortgage!

The house is currently in Joint names - how does that affect the 7 year rule?

CGT as it’s a gift to a connected party, no relief for PPR as it’s a BTL.

Stamp on any consideration (including a mortgage).

For IHT purposes it’s a PET. If they’ve lived there at some point, they might be able to benefit from the increased IHT threshold (gifts to relatives).

If the property is owned jointly, the gain and the PET will be split between the donors. Even if the property is not owned jointly, it would be sensible for one spouse to gift part of the property to the other spouse before gifting it on to benefit from doubling allowances.

Finally, the rent must go to the new beneficiary to avoid gifts with reservations rules, which will not start the 7 year clock for a PET.

Edited by Alpinestars on Thursday 25th April 17:52

[Alpinestars]

dazwalsh said:

just to add a bit more meat to the bone, if the people who are gifting the property have previously lived there, despite it being a btl for a number of years does that remove the capital gains out of the equation?

No, but they might benefit from two additional allowances.

1. The gain on sale will be partly covered by PPR and partly (or wholly) by letting relief.
2. IHT nil rate bands can be increased.