Gifting a Property to Children

Nsar

We own a house which is let out. There is no mortgage on it, we remortgaged part of our home to buy it.

After all costs of finance and ownership, it produces c. £15k income pa

We are seeking to understand if we can gift it to our 2 children who are students, to reduce their need to take on student debt.

Is this possible?

Thanks

marliepanda

Just give them the income?

cte1111

There is no gift tax in the UK, so you can give anyone whatever you like. However it might not be the most practical gift for 2 students. Would they live in the house or just become absentee landlords? If they eventually needed to sell, they would pay CGT on the gain, presuming that they did not live there.

Person_one

Possible, but not a good idea, you'd be giving them all the legal responsibilities of being landlords, plus the gift of extra stamp duty to pay when they do eventually buy their own first homes.

Agree with the above poster, why not just give them the cash each month?

davidmcn

Do they want all the legal responsibilities of being landlords?

Probably more difficult for siblings to reach consensus on everything.

Would also complicate their lives when they want to buy their own properties (additional rate of SDLT/LBTT, no first time buyer privileges, etc).

Nsar

The purpose of gifting the property is so that income between them is below the tax threshold.

I'd continue to handle the fun & games of managing the property until such time as they wanted to take that on.

I think losing 1st time buyer privileges is the deal breaker - I hadn't thought of that, thanks.

POPPYOSCAR

Yes you can.

If this property has increased in value since you bought it, you(not them) may be liable for Capital Gains Tax, even if it is gifted and no money changes hands.

As you have rented it out there is formula for working out your liability which will be less than if you had not.

If it does give rise to CGT do you have sufficient capital to pay it?

Nsar

We only bought the house in Jan so whilst there has been some CG (based on informal study of the local market) it wouldn't be a problem.

G_M

So this is really a way to reduce the tax liability?

Are they going to live there? If not, they will potentially have Capital Gains Tax to pay eventually. Plus as sid, hey'll miss out on HTB ISAs etc.

Nsar

That's correct (about the tax).

Hoploz

Are they students in the same area? Buy them instead a house to live in and share with others perhaps for an income. Or if they are not together then buy them a house each.

That way you're saving them paying rent elsewhere and costs can be covered by renting rooms to their friends.

Really it wouldn't matter whether you were the owner or they were, they'd still be saving the rent even if you took the rental income from the other rooms to pay a mortgage.