Which is more tax efficient - giving or selling property to my son (for an expat)

getmore4less

Farrella wrote: »

Ah this is not about my money vs his money, it's only about minimising tax while transferring the property into his name....he's the one who has been paying the mortgage anyway.

What would the best procedure be for giving him the property?

If that is a UK mortgage in someone else's name(yours) that probably creates some UK taxable income(not much as it is just the interest).

zygurat789

May it not be cheaper, taxwise, to keep the house and leave it to your son in your will, that way he will acquire it at the market value on your death.
Why bother giving it to your son at all if it is going to be sold in the near future, sell it yourself and only have to worry about one tranch of tax.

Mattygroves2

Farrella wrote: »

And how would the "market value" be determined? Would a valuation by an estate agent be useful?

Ultimately if HMRC have concerns they will refer it to the District Valuer who will decide. Usual advice is to get it valued by a RICS surveyor.

Farrella

If I keep it and leave it on my will, wouldn't he have to pay inheritance tax?

It was the change in capital gains law next year that has prompted the idea of giving/selling him the flat. Also it's better to have a mortgage in his name rather than my name...

zygurat789

Farrella wrote: »

If I keep it and leave it on my will, wouldn't he have to pay inheritance tax?

It was the change in capital gains law next year that has prompted the idea of giving/selling him the flat. Also it's better to have a mortgage in his name rather than my name...

Your son will NEVER have to pay IHT. His estate may have to after his death just like your's might have to after your death. We do not know where you are or what the inheritance taxation may be where you live.

booksurr

Farrella wrote: »

If I keep it and leave it on my will, wouldn't he have to pay inheritance tax?

It was the change in capital gains law next year that has prompted the idea of giving/selling him the flat. Also it's better to have a mortgage in his name rather than my name...

entirely depends on whatever the inheritance tax rules are in whatever country of which you are currently a tax resident

there are no UK IHT implications since IHT is charged against the estate (you) not the beneficiary (your son) and as you are non UK resident your estate is NOT subject to UK IHT

Your_Hero

It's not the UK residency status that affects IHT (only CGT and income tax). IHT depends on domicile status or deemed domicile. OP should be non-UK domiciled.

This does not mean he is exempt for IHT purposes. His UK assets are still liable for IHT. Assets outside of the UK will not be included. You will also have a full NRB (£325,000). This is a complex area because you need to also consider your spouse's domicile status, and depends how the property is owned, e.g. single or joint etc.

http://www.hmrc.gov.uk/cto/customerguide/page20.htm#5

Without knowing the full details, it's difficult to say which is the most tax-efficient. My guess is probably an outright gift, which will be a PET for IHT purposes and could be added back to your UK estate if you die within 7 years. Whether IHT applies or not depends on you and your spouse's domicile status and the value of the UK assets.

booksurr

Your_Hero wrote: »

It's not the UK residency status that affects IHT (only CGT and income tax). IHT depends on domicile status or deemed domicile. OP should be non-UK domiciled.

OP left the UK over 20 years ago. There is no possibility he is liable for UK IHT if you read his other posts - there is enough detail therein

Farrella

Thanks for the advice again

So I guess the consensus from everyone is I should "gift" the flat to my son, which will incur no stamp duty. And we should get a surveyor to value to flat to ascertain current market value for future capital gains purposes. Original purchase price was £250k but it's worth twice that now.

What should I do with the £35k mortgage that is currently in my name? Can the mortgage stay the way it is without switching anything (I've got a good rate at the moment, under 2%)?

Your_Hero

booksurr wrote: »

OP left the UK over 20 years ago. There is no possibility he is liable for UK IHT if you read his other posts - there is enough detail therein

That does not matter. UK assets will be assessed for IHT purposes even for non-doms.

Which assets are taxable in the UK?
Generally, if you are domiciled, or deemed to be domiciled, in the UK, inheritance tax applies to your assets wherever they are sited.
If you are domiciled abroad, inheritance tax applies only to your UK assets. However, if you are domiciled abroad there is no charge on excluded assets and we may remove certain other types of UK assets from the tax charge. For more information on excluded property see 'What is excluded property?'