To take the gift or not. What's going to better in the long run?

w4terfall

1st post so bare with me guys.

I built a house on my inlaws land a couple of years ago and me, my wife and son live in it. Iv never owned a house before and therefore never had a mortgage and neither has my wife.

To give us security in the future(as our house is classed as part of their estate) the inlaws are offering to gift us their home when the mortgage is paid off in a couple of years.

At first I was all up for taking the gift so we had something in our name but going forward we are looking at starting a property renovation business.

If I take the gift then I can mortgage it to release the equity and invest in a house to renovate and sell on. However it would be then classed as second home and CGT will start to come into effect. (If what iv understood read on here anyway)

If I stay as I am then I can invest in a property as if it were my own to live in and therefore miss CGT just pay income tax as it will become my sole job eventually. The property's I'm aiming for will be small profits so to stay under the 40% tax bracket for as long as possible.

Any advice greatly appreciated. I don't want to seem ungrateful of the gift but I want what's best for the future. Thanks

da_rule

Did they split the title when they built your house? If not, could they do so and just gift you the house you live in and the land around it. You could then mortgage against this. Their mortgage company may be willing to let them do this before the mortgage is paid off if the retained house and land has enough value.

CGT is one consideration, as is inheritance tax. If they continue to live in the main house it could still be considered part of their estate on their death, unless they are paying a market rent.

da_rule

Also, when you say 'as if it were my own to live in', what do you mean? Unless you lived there as your primary residence then you would have CGT to pay. Just because it is the only property you 'own' wouldn't make it exempt from CGT. https://www.gov.uk/tax-sell-home/private-residence-relief

w4terfall

Due to access we can't split until 5 years have passed since final signing off our property due to retrospective planning laws by which time their mortgage is up.

Iv just been reading up on a 'gift with reservation of benefit'. I don't intend to charge them rent on something they have already paid for. Another reason to turn down the gift in my eyes.

w4terfall

Whilst working on the property I puchased it would become my main residence. I currently live in Essex but I'm originally from the north. Due to the prices in the south there is no way I could afford to do what I intend to do for atleast 15 years I would imagine. By moving home I would be able to do it sooner and also have a better understanding of the area and market.

Cakeguts

w4terfall wrote: »

Due to access we can't split until 5 years have passed since final signing off our property due to retrospective planning laws by which time their mortgage is up.

Iv just been reading up on a 'gift with reservation of benefit'. I don't intend to charge them rent on something they have already paid for. Another reason to turn down the gift in my eyes.

By retrospective planning laws do you mean that you haven't got planning permission for the house you live in?

da_rule

Cakeguts wrote: »

By retrospective planning laws do you mean that you haven't got planning permission for the house you live in?

Exactly what I was going to ask.

w4terfall

No, we have planing and the building is signed off. The officer whom signed it off when asked if we could separate the two buildings on the deeds said it would have to be in place for 5 years before the council would agree to it due to access through the side of the garden.

da_rule

The council don't have to agree to it? If I want to sell a part of my garden to you I don't have to tell the council. I would just sell it to you and we'd register it at the Land Registry.

Does the property have it's own council tax account and a separate address with Royal Mail?

w4terfall

Council tax yes, address no.

Where we are situated backs on to a council owned park. Planning was given for the building to be built as an annexe not as an independant address. Hence we have to wait until the 5 year mark to re apply. At that time if they grant that it can exist as an independant property we can split the two on the deeds.

Cakeguts

So what is the bit about retrospective planning permission? What is that for?