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Renting out a second home with joint ownership and minimising inheritance tax
Riom
Posts: 2 Newbie
Hi
My parents are retired, and wish to purchase a second property with the intention of renting it out. Both properties would be mortgage free.
My parents would also like to add my name to the new property with the hope that it would minimise any future inheritance tax.
I currently do not own a property, and live with my parents (for health reasons), but I work full time and earn an income.
By adding me to the ownership of the property, will this increase the tax payable on the rental income? (seeing as the joint income of all 3 parties involved will be more than if it were just a retired couple).
And secondly, would this be the right way of going about trying to minimise inheritance tax, or would this not be allowed?
thanks
My parents are retired, and wish to purchase a second property with the intention of renting it out. Both properties would be mortgage free.
My parents would also like to add my name to the new property with the hope that it would minimise any future inheritance tax.
I currently do not own a property, and live with my parents (for health reasons), but I work full time and earn an income.
By adding me to the ownership of the property, will this increase the tax payable on the rental income? (seeing as the joint income of all 3 parties involved will be more than if it were just a retired couple).
And secondly, would this be the right way of going about trying to minimise inheritance tax, or would this not be allowed?
thanks
0
Comments
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Tax isn't paid jointly, so your liability would be for a share of the income.
Only way to avoid Inheritance tax in this manner would be to own as joint tenants.
But - have you considered the legal implications of being landlords??!!0 -
But you would be liable for Capital Gains Tax in the future.0
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Is it impossible for you to live in your own home without your parents' assistance?
If you can live alone (in a property close by perhaps), they might consider gifting you the money now to buy a property outright in your own name in the hope of a PET.
If they need income, they might lend you the money to buy the house, take a first charge against it and you pay them interest only on the loan - they would "forgive" you £6000 (2x £3000) a year on the capital sum for as long as they live, adjusting if gift allowance increases/decreases etc.
Their wills might individually show full forgiveness of half the capital or an amount up to NRB etc.
You and your parents should take expert advice from solicitor/accountant as appropriate.0 -
Tax isn't paid jointly, so your liability would be for a share of the income.
Only way to avoid Inheritance tax in this manner would be to own as joint tenants.
But - have you considered the legal implications of being landlords??!!
That can make things worse and will not reduce IHT if any of them die.0 -
your question has implications on stamp duty, capital gains tax, inheritance tax and income tax and would need many pages to give a decent answer.
Go and see a proper financial adviser as suggested by posters on your other thread where you also ask about IHT0
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