Discussion
Myself and partner are in the process of looking to buy a property (will be our main residence) and I have some questions to do with tax on income and CGT questions on her current property.
She has a house in her name(used to be her grandparents that was gifted to her years ago) that she will rent out (her intention is to allow her retired parents to take a large proportion of the income to help them out) - she is a higher tax payer - will she have to pay tax on all the income or just whats left after giving her parents some?
We will eventually sell this house (5 years or so), what capital gains tax will have to be paid?
I know we need to speak to an accountant but just wanted an idea!
thanks
She has a house in her name(used to be her grandparents that was gifted to her years ago) that she will rent out (her intention is to allow her retired parents to take a large proportion of the income to help them out) - she is a higher tax payer - will she have to pay tax on all the income or just whats left after giving her parents some?
We will eventually sell this house (5 years or so), what capital gains tax will have to be paid?
I know we need to speak to an accountant but just wanted an idea!
thanks
It's her house. Therefore it is her rent and she will be taxed on that rental income. If she choses to pass the rental profits on to some other individual afterwards is her business and has no effect on her tax liability.
When she eventually disposes of the property, she will be subject to Capital Gains Tax on anyb taxable gains on the sale. The gain will be vased on the sale proceeds less the market value of the property at the date she acquired it.
Are you a legally married couple?
Are you a higher rate taxpayer.
What would she say to transferring half the property to you?
When she eventually disposes of the property, she will be subject to Capital Gains Tax on anyb taxable gains on the sale. The gain will be vased on the sale proceeds less the market value of the property at the date she acquired it.
Are you a legally married couple?
Are you a higher rate taxpayer.
What would she say to transferring half the property to you?
If there is any subsequent capital gain, the capital gain tax will also be less your partner’s personal capital gains allowance, hence the possible benefit of having the intended rental property in joint names (two personal tax allowances).
From gross rental income, one can claim allowances for the costs of all repairs, which for an older property like the one your partner has inherited, would be quite high.
Other allowances that can be deducted from the gross rental income, include management charges, cleaning, gardening and general maintenance costs, with the same in mind, is it not possible rather than gift the money, you pay your partner’s parents to carry out these chores?
Mortgage interests can also be deducted from the rental income, with the mortgage not necessary having to be raised against the rental property, the purpose, reason for the loan being the divine factor of whether interests are tax allowable.
Lastly, also check that any gift, income payments to your partner’s parents, do not have a bearing on their tax or benefits position etc.
From gross rental income, one can claim allowances for the costs of all repairs, which for an older property like the one your partner has inherited, would be quite high.
Other allowances that can be deducted from the gross rental income, include management charges, cleaning, gardening and general maintenance costs, with the same in mind, is it not possible rather than gift the money, you pay your partner’s parents to carry out these chores?
Mortgage interests can also be deducted from the rental income, with the mortgage not necessary having to be raised against the rental property, the purpose, reason for the loan being the divine factor of whether interests are tax allowable.
Lastly, also check that any gift, income payments to your partner’s parents, do not have a bearing on their tax or benefits position etc.
This could be done via a Declaration of Trust so that her parents do own a % of the property.
A transfer of (say) 1% of the beneficial interest would allow a transfer of 100% of the rental profit. This would need to be fined tuned as her parents are married (I assume)and that presumes a 50:50 split which may not be optimum.
Not a transaction to be entered into lightly (CGT, IHT, SDLT etc), so professional advice recommended.
A transfer of (say) 1% of the beneficial interest would allow a transfer of 100% of the rental profit. This would need to be fined tuned as her parents are married (I assume)and that presumes a 50:50 split which may not be optimum.
Not a transaction to be entered into lightly (CGT, IHT, SDLT etc), so professional advice recommended.
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