Transfer of 2 x BTL's to kids under 7 year rule......
Discussion
In brief, we are considering transferring 2 buy to let properties into the names of our 3 children.
I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
philcray said:
In brief, we are considering transferring 2 buy to let properties into the names of our 3 children.
I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
You're mixing up IHT and CGT.I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
If you survive 7 years there is no IHT but they'll still have to pay CGT on an eventual sale based on the market value at the time you transfer the property.
Unless you mean from your own position? A quick google suggests you will have to pay CGT https://taxscouts.com/capital-gains-tax-on-gifted-...
philcray said:
In brief, we are considering transferring 2 buy to let properties into the names of our 3 children.
I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
The 7 year rule has nothing to do with CGT - it relates only to IHT.I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
If you have made a gain on the properties that will be taxable when you gift them to the children, even if you don't receive any cash for them.
They will then be liable for CGT on any future gains.
Stamp duty shouldn't be payable if there is no consideration.
How old are the children, do they get on, and are they at a similar stage in life? Are they going to own each one jointly?
How can you transfer a house to a 13 year old?
As has been said, even though you potentially avoid inheritance tax you will still be liable for capital gains tax. Plus you will have to pay stamp duty assuming it is outside of the holiday window.
As someone else has said, if they eventually buy a house themselves they will have to pay secondary stamp duty.
As has been said, even though you potentially avoid inheritance tax you will still be liable for capital gains tax. Plus you will have to pay stamp duty assuming it is outside of the holiday window.
As someone else has said, if they eventually buy a house themselves they will have to pay secondary stamp duty.
Thanks, the kids are 13, 17 and 19 currently (birthdays coming up soon). They all get on well but I am aware that can change.....!
In summary, we will potentially be liable for CGT on the £50k hypothetical gain (less our CGT allowance say £25k), can we offset the loss on one property against this?
The value at transfer will presumably as estimated by a couple of local EA's?
The big question is, will they be liable for CGT on the total value of the properties when they sell or just the gain from the figure used at transfer?
philcray said:
Thanks, the kids are 13, 17 and 19 currently (birthdays coming up soon). They all get on well but I am aware that can change.....!
In summary, we will potentially be liable for CGT on the £50k hypothetical gain (less our CGT allowance say £25k), can we offset the loss on one property against this?
The value at transfer will presumably as estimated by a couple of local EA's?
The big question is, will they be liable for CGT on the total value of the properties when they sell or just the gain from the figure used at transfer?
They will be liable for the CGT when they sell, using the base cost at the date that you transfer them, otherwise HMRC would tax the same transfer twice.In summary, we will potentially be liable for CGT on the £50k hypothetical gain (less our CGT allowance say £25k), can we offset the loss on one property against this?
The value at transfer will presumably as estimated by a couple of local EA's?
The big question is, will they be liable for CGT on the total value of the properties when they sell or just the gain from the figure used at transfer?
Depending on the values HMRC may require a formal "red book" valuation, not just a nod from a local EA.
This has got "potential nightmare" written all over it; what is your primary motive in undertaking these transfers now?
Joey Deacon said:
How can you transfer a house to a 13 year old?
As has been said, even though you potentially avoid inheritance tax you will still be liable for capital gains tax. Plus you will have to pay stamp duty assuming it is outside of the holiday window.
As someone else has said, if they eventually buy a house themselves they will have to pay secondary stamp duty.
Why would stamp be payable if there is no mortgage and no consideration?As has been said, even though you potentially avoid inheritance tax you will still be liable for capital gains tax. Plus you will have to pay stamp duty assuming it is outside of the holiday window.
As someone else has said, if they eventually buy a house themselves they will have to pay secondary stamp duty.
While the concept is very generous on the face of it, there are probably better ways to transfer wealth to your kids.
Would existing rent be divided between the three of them as taxable income?
As others have stated, disputes may arise down the line over whether to sell or retain one/other/both properties. What if one or two of the three decide they want to live in the properties as their primary residence? Would they pay some rent to the others, who determines the rent, what if they fall behind in that rent? Occupation would also cause further complicating the CGT calculations on eventual disposal.
The timing only matters for IHT, and even then the 7 year rule is only relevant to the latter death of you/your wife. As such, I'd probably sit tight for now and do nothing (drip feed the rent they might have received with regular monthly gifts of cash).
If you really wish to transfer 2 properties to three kids, then do it via a trust with rules that will ensure no falling-out.
Would existing rent be divided between the three of them as taxable income?
As others have stated, disputes may arise down the line over whether to sell or retain one/other/both properties. What if one or two of the three decide they want to live in the properties as their primary residence? Would they pay some rent to the others, who determines the rent, what if they fall behind in that rent? Occupation would also cause further complicating the CGT calculations on eventual disposal.
The timing only matters for IHT, and even then the 7 year rule is only relevant to the latter death of you/your wife. As such, I'd probably sit tight for now and do nothing (drip feed the rent they might have received with regular monthly gifts of cash).
If you really wish to transfer 2 properties to three kids, then do it via a trust with rules that will ensure no falling-out.
philcray said:
In brief, we are considering transferring 2 buy to let properties into the names of our 3 children.
I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
They will be the legal owners the day you transfer ownership to them. If you survive 7 years then there is no IHT to pay.I understand that, if we survive for 7 years after transfer, they will then be the legal owners with no capital gains payable on sale?
There are no mortgages on the properties, 1 has probably fallen in value a little and one has gone up in value about £50k - is stamp duty payable on this?, stamp duty holiday?, can we offset loss of one against the other?
Solicitors fees would be incurred no doubt but are there any other costs to be aware of?
Any experience or knowledge of doing this would be much appreciated.
Thanks
You will pay GCT on the value at time of transfer.
SDLT is payable on market value.
As the properties are mortgage free there is no need to involve any legal people. Call the Land Registry and explain what you want to do and what forms you need to complete. I know you need to complete TR1 and ID1 and one other from memory, you will have a Land Registry fee to pay.
Further thoughts:
Once you transfer will the rent belong to your children? If not then you're opening a IHT can of worms.
The Capital Gain of one can be offset against the other. You can both use your GCT allowances, and as you own the properties you could simply transfer a percentage every tax year so you both come under your CGT allowances.
Then there is the slight matter that your children are now property owners and as such get a 3% SDLT loading on any future purchase.
If you want to do it soon then look into Trusts
Edited by Sir Bagalot on Saturday 27th March 23:44
For two reasons you would be wise to get proper advice from paid advisers,
1. To me the whole thing looks like a minefield from the family aspect,
2. Some of the tax and other technical guidance stated in this thread is not correct.
My limited comments,
You’ll pay CGT (if relevant) at disposal on your gain,
So sell the properties and give the kids something else,
After getting paid advice on how best to arrange things regarding tax (and trusts).
If it was easy, everybody would be doing it.
1. To me the whole thing looks like a minefield from the family aspect,
2. Some of the tax and other technical guidance stated in this thread is not correct.
My limited comments,
You’ll pay CGT (if relevant) at disposal on your gain,
So sell the properties and give the kids something else,
After getting paid advice on how best to arrange things regarding tax (and trusts).
If it was easy, everybody would be doing it.
Depending on your own residence value, other assets, cash and taking into account marriage allowance on death of a spouse and main residence, maybe worth allowing 1 or 2 to transfer upon death if it keeps you under the IHT threshold with benefit being capital gains will also wash on transfer upon death.
Also another issue, what if one of your kids was to knock someone/marry and turn messy? Could these assets be up for grabs?
Also another issue, what if one of your kids was to knock someone/marry and turn messy? Could these assets be up for grabs?
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