Sorry - another capital gains tax on BTL question...

HappyNow

Hi, I wonder if anyone could offer some advice?

In 2003, my husband and I extended our mortgage on the house we live in to purchase a buy-to-let house. The new mortgage in 2003 was £74,000 (£49K BTL purchase, £10K refurbishing it and purchase costs, £15K to clear our existing mortgage), and we now owe £53,100 on it. The BTL is a lovely house, we've always had excellent tenants, and it is ticking along nicely just covering its own costs, including the mortgage, leaving me to focus on clearing that ridiculous unsecured debt in my signature .

The idea behind buying it was always that somewhere around 2020 (when we will be in our early 60s and should be debt-free apart from the mortgage) the BTL would be sold, the mortgage paid off, and the remaining capital would be split four ways - half for myself and my husband to share, and a quarter each for our two children to help them onto the property ladder. Back in 2003 our children were aged 10 and 12, so they are now both young adults, although they're studying/travelling so in no rush to buy houses - around 2020 will suit them fine.

I understand that when we sell we will have to pay Capital Gains Tax on the difference between purchase and sale prices, minus the allowable costs etc. My question is - would it be wise/legal/tax-efficient to now have the BTL ownership put jointly into all four of our names, so that each one of us could claim the CGT personal allowance when it is sold? We're a close family and there's no question of us falling out/changing our minds or anything, I'm just not sure of the financial impact and wisdom. Or even whether there's anything else we ought to be considering that I haven't even thought of.

Thanks for reading and for any input

booksurr

HappyNow wrote: »

My question is - would it be wise/legal/tax-efficient to now have the BTL ownership put jointly into all four of our names, so that each one of us could claim the CGT personal allowance when it is sold?

it depends... that would count as a disposal to connected persons and as such would trigger a CGT "event" right now for the 2 of you so unless you are happy to pay CGT now rather than in 2020 it is a potentially inefficient idea depending on....

- transfer now and you incur CGT right now

- obviously you would have a lower income henceforth

- your kids would have a higher income, but may not have enough to be taxpayers so they would be better off in terms of tax free income

- when it is sold in 2020 then yes all four of you would have a CGT allowance but you would already have incurred CGT now when you transfer to the kids

Savvy_Sue

HappyNow wrote: »

We're a close family and there's no question of us falling out/changing our minds or anything, I'm just not sure of the financial impact and wisdom. Or even whether there's anything else we ought to be considering that I haven't even thought of.

You say they're now young adults, so regardless of the closeness of the family you have to allow for the fact that they might marry. And if they then split up, and the BTL is in all of your names, then their share of the property will be part of the marital assets.

It may seem vanishingly unlikely atm, but I think it's something you should think about and probably take professional advice on.

purdyoaten

Savvy_Sue wrote: »

You say they're now young adults, so regardless of the closeness of the family you have to allow for the fact that they might marry. And if they then split up, and the BTL is in all of your names, then their share of the property will be part of the marital assets.

It may seem vanishingly unlikely atm, but I think it's something you should think about and probably take professional advice on.

The two children would also be required to complete tax returns in order to declare their share of the profit on the let property in each tax year.