Second Home - Tax

Payam_Azadi

I inherited a property and rented it out to tenants. As I didn't know what I was doing I didn't get the property deeds transferred to my name they are still in my dad's name. I don't own a property I rent and as that's coming to an end I've decided I need to buy my own home.

From what I have read it's no good me owning one property and my spouse owning the other as we are counted as a single unit and will still get charged the stamp duty for two homes. I wondered if I could transfer the property details into my adult child's name who lives with me and doesn't own a property.

I know I need to see a professional but do I see a financial advisor or a solicitor or both and which order do I need to see them. Helpful and non sarcastic thoughts would be appreciated.

happylucky

I am by no means an expert or even particularly knowledgeable in this area, but my guesses are:

1) no stamp duty payable on inherited property
2) property can be given without reservation to a child over 18; under 18 must be held in trust with parent as legal owner inc all associated tax obligations
3) variation of will could have been made to pass property directly child, but within strict time limit...used to be 2 years

Someone else will know much more.

I'm assuming you are UK resident and property is located in UK. Point 2 is not relevant in many countries as they permit minors to own real estate outside trust structure etc.

Good luck.

DTDfanBoy

That's the perfect risk free way to avoid the new stamp duty, I'm sure that your adult son will appreciate the gift, I wonder what he intends to do with his new found wealth, I sincerely home he doesn't decide to sell his new property to fund a five year bender :beer:

Payam_Azadi

Ha! Ha! So do I! Adult child is a daughter and I guess I should be worried when she turns up in a new Aston Martin! Property is in Uk and family are uk residents.

Keep_pedalling

You don't say how long you have owned the property, but if it's been some time and it's value has susstancialy increased then CGT may be payable on transfer.

xylophone

You inherited a property - the executors should have transferred it into your name once probate was granted.

The house had a value at the time it was inherited by you - what is the value of the house now?

You are considering gifting the property to your daughter - the property is not your PPR so you may need to consider CGT on the value of the gift?

Your daughter becomes the owner /landlord. She has a landlord's responsibilities and is entitled to receive the rent. She will need to consider the tax implications.

What effect will owing this property have on her liability to stamp duty if she chooses to purchase in the future?

Had you considered simply selling the inherited property and using the proceeds to buy a property of your own?

You could have a CGT liability on sale.

booksurr

Payam_Azadi wrote: »

I inherited a property how long ago? and rented it out to tenants. As I didn't know what I was doing I didn't get the property deeds transferred to my name they are still in my dad's name. so you have been declaring the rental income in your name or your father's name? I don't own a property I rent and as that's coming to an end I've decided I need to buy my own home.

From what I have read it's no good me owning one property and my spouse owning the other as we are counted as a single unit and will still get charged the stamp duty for two homes. correct I wondered if I could transfer the property details into my adult child's name who lives with me and doesn't own a property. yes you can, see below for why that may be a rubbish idea

I know I need to see a professional but do I see a financial advisor or a solicitor or both and which order do I need to see them. Helpful and non sarcastic thoughts would be appreciated.

1. if you transfer a property which is not your main home (patently the inherited and now let property isn't) then you are liable for capital gains tax on the "disposal". A transfer to your child is a disposal. Because you and your child are defined as "connected persons", your taxable gain will be the difference between its probate value at the date you inherited it and its current market value. If that figure is more than your CGT allowance you will be taxed at 18% and/or 28% on the excess

2. There is no SDLT due on a gift as by definition there there no chargeable consideration received by you since your child is not paying you anything for it. So your gift is without SDLT and would indeed mean your new marital home would be the only property you own as a couple and so you would not be subject to the higher rate SDLT on its purchase

3. As you would no longer be an owner of the let property you would no longer be entitled to receive the rental income. Instead your child would be liable for income tax on that income. Obviously your child will become the legal landlord and will have to notify the tenant of the change. Your daughter will then be legally liable for all other aspects of being a LL.

4. technically speaking as the property remains in your father's name it is his estate which is liable for income tax on the rent. Presumably you are the sole beneficiary of his estate so you can also meet that liability but again technically speaking if father died more than 1 year ago his estate no longer gets a tax free personal allowance so the tax bill is not what you've been paying if you've been declaring the money as though it were yours. Of course you'd have to be rather unlucky for HMRC to push it that far though.

5. add up all the downsides of your plan as in 1 - 3 above, and then see how that compares to you "saving" the 3% SDLT on the new property by making the daughter the new owner & landlord