Give our Buy to Let away?

by Readers Question

3 months ago

Give our Buy to Let away?

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Give our Buy to Let away?

We purchased a house as a BTL in 2014 for £120,000. It’s now worth around £177,000 we only got the place so our daughter had some where to live after divorce

The mortgage owed now is £56,000, and we would like to give the house to our daughter and she get a mortgage for the £56,000 outstanding, she would (we think) end up paying much less per month.

Our daughter is now working full time an able to pay a mortgage instead of claiming HB for rent
what would the TAX implication be for us!

I am 65 and retired and 20% tax payer my wife does not work.

Many thanks

Yew Tree



Comments

Neil Patterson

3 months ago

If you gift the property for no value then you will trigger a CGT liability at the current value.

If there is a mortgage liability then you have to gift at value which means there is a SDLT liability.

You also then have IHT and PET 7 year issues to consider.

Also and mortgage lender for your daughter would want deed of gift indemnity insurance.

We work with a dual qualified solicitor and barrister who is able to deal with and advise on these sorts of issues if you wish to contact us direct on info@property118.com

Charles de Lastic

3 months ago

Yes I agree with Neils comments.

As you say we I presume you own this BTL with your wife and so have two CGT allowances available to use.

However, as it is a gift to your daughter you could look to gift it over a few tax years to avoid the CGT. I am sure you could find a sensible lender who would agree as you would have to be party to the mortgage while some of the property was is your names.
A bit more expensive in legal fees but this is easily saved by the tax mitigation

Dr Rosalind Beck

3 months ago

Reply to the comment left by Charles de Lastic at 23/04/2018 - 13:39
If it is gifted in stages, would this be deemed to be 'linked transactions'? I have been reading up a bit on this and hence the question.

yew tree

3 months ago

thank you all for taking the time to reply
this what has been decided
our daughter will continue to pay rent £650.00pm
my wife and I will use this money to pay down mortgage
£630 on mortgage £20.00 to cover insurance and gas safe work , mortgage paid off in 10 years
daughter will still get small amount of rent paid by housing benefit
if she were to lose her job then HB would pick up almost all the rent
for us it means grandchildren and daughter have place to live , and its not costing us anything , apart from all our savings went in to deposit for house
in the very long term (we hope) our son will have our bungalow (worth more than house) daughter will have house.

so what we were trying to do, is reduce our daughters monthly outgoings is not going to work , she will continue to pay rent until we shuffle off , we may even have some spare money in ten years

Dr Rosalind Beck

3 months ago

Reply to the comment left by yew tree at 24/04/2018 - 08:16
Have you taken into account inheritance tax?

yew tree

3 months ago

Reply to the comment left by Dr Rosalind Beck at 24/04/2018 - 08:29
no,I have not taken inheritance tax into account
do you have ideas for me to look at or at least think about

Dr Rosalind Beck

3 months ago

Reply to the comment left by yew tree at 24/04/2018 - 15:13
I'm not an expert in this but others here will be.

Winsome P

3 months ago

Would an exchange of contracts upon delayed completion assist? Inflation and prices tend to rise. If she became a shareholder of a company that owned the company and gradually bought off you some minority shares of the limited company that might help too. She could claim some expenses. Settle both at the same time as its 7 years until the gift is exempt of IHT although it tapers after 3?


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