gifting plot to children

wolfwoman

Hi All
I am new to this site and not sure if this is the right place to post but here goes!

We (husband & I) have a plot of land with a two storey shed on it that has been valued at 200K, with planning permission to turn the shed into a one bedroom house.

We would like our four adult children to benefit equally from this plot of land and need advice on when to dispose of this asset.

Should we sell the plot now and give each of them 50K minus tax or should we hold on to the plot, invest some money into it and sell it at a later date when it is worth more?

An estate agent has suggested we would get around £350K if we turn the shed into a one bedroom house and sell it. We could get upwards of £700K if we apply for planning permission later down the line to knock the house down and build something bigger. We can't apply for planning permission now for the bigger build as we have been advised it has to be lived in as a one bedroom house for at least a year before we could be considered for further planning permission.

My husband is 65 and I am 59. We both have a normal life expectancy.

G_M

What other assets do you have?
Do you have pensions arranged?
Have you enough to pay for Care Homes if required in future?

Giving financial advice on flimsy information is not usually wise.

But on the specific question:
* You sell now, you get £200K less Capital Gains Tax
* You build a one bed house for (£150K?) and sell for £350K? Less CGT. Where is the profit for all the time and hassle?
* You build a one bed house for (£150K?, wait a year, then spend another (£250K?) knocking it down and building a 2-3 bed house and sell for £700K. Again the profit seems minimal for the likely time, effort and costs of development.

Keep_pedalling

Presumably you have plenty of other assets with potencial IHT to worry about, the best time to pass this on would be now, to give you the best chance of living another 7 years to take these gifts out of your estate.

P.S. I've never seen a 2 story shed before could we have a picture?

POPPYOSCAR

Keep_pedalling wrote: »

Presumably you have plenty of other assets with potencial IHT to worry about, the best time to pass this on would be now, to give you the best chance of living another 7 years to take these gifts out of your estate.

P.S. I've never seen a 2 story shed before could we have a picture?

But would they not be liable for CGT?


Would they not be better off building the house with a mortgage, renting the house out and giving the rental income as cash gifts to the children?


Then the mortgage will be deducted from any IHT?

Keep_pedalling

POPPYOSCAR wrote: »

But would they not be liable for CGT?


Would they not be better off building the house with a mortgage, renting the house out and giving the rental income as cash gifts to the children?


Then the mortgage will be deducted from any IHT?

Yes (assuming the gain is over their annual allowance) but the only way to avoid CGT would be to hold onto the land and their children would have to wait to inherit, but the OP wants to gift the money before they die. Also CGT is much lower than IHT so better to pay a little now rather than more later.

DaftyDuck

I have sold bits of land off, having gained planning permission, but I have never bothered to go through the build process myself. It always seems like too much faff, and not that much more reward. In addition, you dramatically reduce your market. 'Tis (relatively) easy for a purchaser to change a plan from a four bed with double garage to a three bed with single plus another sitting room, say, but once built, folk are reluctant to get the builders in straight away.

I'm sure the builders who took on my two plots made as much as I did (not more). Took me a couple of weeks, and a couple of thousand quid, took them many months, and a fairly hefty up-front financial risk.

wolfwoman

Thanks all, some really helpful advice. We will have to pay CGT as the plot is not counted as part of our house.

It sounds like it might be better to sell it now and release some money before Inheritance Tax might apply. One of my children is considering buying the plot of the other siblings with her partner. The other children are worried if they let her buy them out, she will make a lot of money down the line when it sells (it's in quite a prime location in Oxford).

However, she says the other children would be better taking their share now and investing it into their own properties.

A lot to think about!