cgt helping daughter on property ladder

jhe

thanks for replies

TM1976 i woudnt be guarantor i would own the property jointly 50/50 with daughter till she can remortgage in her own name then i could transfer my 50% into her name. she is to be responsible for all payments and bills.
simstwins. i am not sure about the laws on trust funds i will look into it.
i was just trying to get the quickest way to help her as the house might get snapped up it is a good buy

Rolo_Tomasi

For CGT purposes it is the beneficial owner of the property that matters however in the absence of any contrary evidence the legal owner will normally also be the beneficial owner. There may be scope to claim that you are not the beneficial owner as you are not providing any financial assistance however this is an argument that you may lose.

You state that the property will be owned 50/50 - is this a requirement of the mortgage? When two people own a property they are usually classed as joint tenants and as such they each own half, however it is possible to own a property as tenants in common where you can vary the split.

If you were able to go down this route your daughter could own say 75% of the property and you own 25%. When it can to transferring the property into your daughters name only 25% of any increase in value would be chargeable on you. Therefore the property could increase in value by £40k and your gain would still be covered by your annual allowance.

00ec25

"If you give away your home, for example to a child, you don't have to pay Capital Gains Tax as long as you're entitled to full Private Residence Relief."

Therefore in your case you will be liable to CGT as it is not your PPR. However, what, realistically, is the likely gain the property will make in 2 - 3 years? Remember CGT is 18% of the gain made and you are allowed a personal exemption allowance in the tax year in which you transfer it to her - for example if you did it in 09/10 the allowance is 10,100, so if the gain is less than this, remember its only 50% of the total gain anyway for you, then you'd incur no CGT liability.

(Your gift to her will have inheritance liabilities, ie live for 7 years and it will be free of IHT if your estate is actually large enough to be liable to IHT in the first place of course)

jhe

great advice thanks. the mortgage quoted is tenants in common 50/50. if i go down the route of joint mortgage i will just have to hope that property prices dont soar in the next few years thanks again to all for your helpful advice.

John_Pierpoint

How long does anyone think CGT is going to stay at 18%?

If you have something that still shows a capital gain and you want to sell it (or roll it over in some way to crystallise the gain) I would do it before the next election.

jhe

thanks for the advice jimmo. yes the deposit is hers and she will be paying all the bills including the mortgage and all bills will be in her name alone,she will also be living in the house. if i go down the route of joint mortgage hopefully in 2 years she will be able to remortgage in her own name, so as long as property prices dont go sky high hopefully we wont have a problem with cgt anyway. and i wouldnt be in the inheritance bracket so hopefully they wont think i have disposed of funds.thanks to all for advice given

jhe

hi again, this is just an afterthought to complicate things even more, if my other half was to gift or give a long standing loan agreed between daughter and oh for say 20% of the purchase price, that would mean she would have 50% deposit meaning a better deal with interest rates on mortgage, it would not be disposal of assets as neither of us are in the inheritance tax bracket. she would i suppose just be getting part of her inheritance up front.any ideas were we would stand with hmrc.

John_Pierpoint

Beware of giving loans to children and then dying.
My grandmother and my father did that.
When Gran died, dad had to repay the loan so that 40% of it could be paid to the government and he could inherit the 60% left.
Trust your children, you brought them up?

jennifernil

I suppose it is more difficult now, but we had no problems doing a guarantor mortgage for our daughter in 2003 with Halifax. She was only 18 and a student. Deposit was partly hers, partly her brothers and the rest from us.

Property has always been in her name only.

Only took about 10 days to arrange.

jhe

thanks john_pierpoint.can i ask is the reason dad had to repay the loan and lose 40%, was it inheritance tax reasons? in our case if oh gifts money to make a larger deposit it wouldnt make any difference for us regarding inheritance tax, we wont fall into that bracket, even so, i will try to keep breathing so as not to raise anymore questions from hmrc!