Do you have to pay tax on second home that family are living in?

DRS1

No doubt someone can shoot this down:-
1 your parents borrow money on their home increasing their mortgage
2 they lend you that money to buy your new home in your name - the loan should be secured with a mortgage just as if you had borrowed it from a bank to protect your parents in case you die divorce or whatever.
3 when you sell your old house you use the proceeds of sale to pay off your old mortgage and then apply to "remortgage" your new house to pay off your parents.
As long as you sell your old house within 3 years you should not need to worry about CGT on either of your houses.

Not sure what you do about interest on the money your parents lend you - any interest you paid them would presumably be subject to income tax in their hands.

CLAPTON

DRS1 wrote: »

No doubt someone can shoot this down:-
1 your parents borrow money on their home increasing their mortgage
2 they lend you that money to buy your new home in your name - the loan should be secured with a mortgage just as if you had borrowed it from a bank to protect your parents in case you die divorce or whatever.
3 when you sell your old house you use the proceeds of sale to pay off your old mortgage and then apply to "remortgage" your new house to pay off your parents.
As long as you sell your old house within 3 years you should not need to worry about CGT on either of your houses.

Not sure what you do about interest on the money your parents lend you - any interest you paid them would presumably be subject to income tax in their hands.

out of curiousity what do you mean

'the loan should be secured with a mortgage just as if you had borrowed it from a bank to protect your parents in case you die divorce or whatever.'

a mortgage for whom, secured on what?

charlieboycat

CLAPTON wrote: »

out of curiousity what do you mean

'the loan should be secured with a mortgage just as if you had borrowed it from a bank to protect your parents in case you die divorce or whatever.'

a mortgage for whom, secured on what?

Just the same as a building society mortgage - except that the lender is the parents, not a BS. Very common.

lisyloo

As the new property is in affect being bought with cash it would be up to my parents who they wanted to put down as the owners

Absolutely correct and sorry if I got that mixed up.
Lenders like the house owners to be the same as the mortgagees (those who are liable) and that's to do with them getting their money back by reposessing if necessary, but if you don't have a mortgage on that property it's not an issue.
If your parents actually gift you 1/3rd of a house (or any other propertion) without reservation i.e. they really are giving it to you, then there could be inheritance tax due if they die within 7 years (this is to stop people giving everything away and avoiding tax on their deathbed), but otherwise no CGT on your portion if you are living there.
If they are giving it to you temporarily i.e. putting it in your name to avoid CGT then I'm pretty sure that's tax evasion and illegal. You can't pretend money (property in this case) that's yours is someone else's to evade tax (unless you're married and then what's yours is theirs).
I totally realise you are not intending anything illegal and are reasearching the avenues.

A private loan from your parents does seem like a possible idea.
But can you afford both "mortgages"? Tradtitional lenders won't lend to you so that does indicate a potential affordaibility issue and rates aren't high right now.
Unless of course your parents give you a preferential rate.
This could work mathematically but your parents are taking a risk that high st lenders wont.
What if your other house doesn't sell for a long time?
Can you afford the both "mortgages" or can your parents afford to subsidise you (if they are going to subsidise you).
Any profit they make on the loan would be subject to income tax, but they could just charge you what it costs them and not make a profit.
So is that affordable?