How do we transfer ownership of rental house to my 18 year old son?
9:37 AM, 2nd November 2020, 5 years ago
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We have an unencumbered rental property which we are considering transferring to our son when he turns 18 next year.
What would be the most straightforward and tax efficient way of conducting this process?
Would Stamp duty be chargeable at this stage?
The value of the property has doubled over an 8 year period since we purchased it.
Your thoughts on this would be gratefully appreciated.
Mark
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Member Since February 2011 - Comments: 3453 - Articles: 286
9:41 AM, 2nd November 2020, About 5 years ago
Hi Mark,
I spoke with Mark Alexander and he confirmed the best way would be by Deed of Gift and as there is no consideration (unencumbered) there will be no SDLT.
However, there will be a CGT liability based on the increase in the value of the property from when you purchased it to it’s market value on the day of the transfer. You will need to have the property valued for this purpose.
To calculate the CGT we recommend you use HMRC’s online CGT calculator, which I have linked to below.
https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/
Member Since July 2013 - Comments: 305
10:51 AM, 2nd November 2020, About 5 years ago
Would it be possible to gift it over a number of years thereby using your CGT allowance each time?
Member Since April 2019 - Comments: 17
10:57 AM, 2nd November 2020, About 5 years ago
Just bear in mind – if he gets married and divorced in the future he will lose half in a settlement. Would you be safer looking at alternatives such as a discretionary trust to ring fence the property? I have considered doing the same for my son who is 26 but wary of future relationship breakdown. It’s a minefield ??♀️
Member Since January 2020 - Comments: 102
11:19 AM, 2nd November 2020, About 5 years ago
As a residential property you would have to report and pay the CGT within 30 days of completion.
If it were gifted to a trust there would be no CGT, but there is a possibility of a Lifetime Inheritance Tax charge, depending on the value of the property and any other previous gifts to a trust.
Member Since June 2019 - Comments: 8
11:55 AM, 2nd November 2020, About 5 years ago
Thanks all for your kind input and expertise.
It’s certainly a minefield with a number of “Trip Hazards”, so we’ll need to carefully consider our options.
Thanks again!
Member Since October 2013 - Comments: 1630 - Articles: 3
12:39 PM, 2nd November 2020, About 5 years ago
Reply to the comment left by Olls63 at 02/11/2020 – 11:19
By gifting the property to a Trust, does it also ringfence it from other ‘risks’ e.g. council taking it to pay for social care (god forbid!), threat of having a charge placed against it in the event of a debt, etc… Also, can I assume you cannot release equity from the property?
Member Since January 2020 - Comments: 102
1:15 PM, 2nd November 2020, About 5 years ago
Reply to the comment left by NewYorkie at 02/11/2020 – 12:39
No, not necessarily. My expertise is tax but would imagine that even though the trust is not a legal person in UK law, once the Land Registry TR form has been completed no charges could be put on the property, especially not if you weren’t a trustee. I have no idea about raising equity on it, but suspect that any equity would belong to the trust, and would incur a tax charge if it were distributed.
Member Since October 2013 - Comments: 1630 - Articles: 3
3:11 PM, 2nd November 2020, About 5 years ago
Reply to the comment left by Olls63 at 02/11/2020 – 13:15
Thank you. That makes sense. But, I would consult a specialist before doing anything.
Member Since January 2015 - Comments: 1435 - Articles: 1
4:57 PM, 2nd November 2020, About 5 years ago
I too would be interested in doing this for my 24 year old daughter.
Member Since May 2016 - Comments: 24
10:37 PM, 2nd November 2020, About 5 years ago
I would be interested in the solution to this too.