Signing over share a house to children

sukhi_1

Hi all,

I bought a house about 8 years ago and putting my dad on the mortgage was the only way i could pass the checks back then. We went on the mortgage 50/50 but as it was really mine, I put down the deposit and have since been paying the mortgage too.

Whats the process in getting it all moved onto my name now i can afford it and have almost cleared the mortgage? Should I pay it all off first to rule out the banks and make it a simpler task or is it easy enough to do while there is still a mortgage outstanding?
We're not trying to trick the system and save on taxes so i don't want to get caught out with rules about the amount you can gift someone per year (the longer we leave it) or things that are in place to stop people cheating inheritance tax etc.

Any help and guidance is appreciated :j

getmore4less

A bit late now but you could have set this up properly with a trust deed at the time specifying your beneficial interests to avoid the current situation.

does/did you dad live in the house?

if not you will have to do a CGT assessment on his share that he gifts you.

As there is still a mortgage and you take it over(requires a full application) there will be a SDLT assessment as there is consideration.

if you wait till the mortgage is gone the SDLT will not be needed(could be zero anyway).

The gift will be a PET on dads estate lingers for 7 years.


There are no limits on gifts.

sukhi_1

Does/did you dad live in the house?
Yes he did, and i guess he can just as easily move back in if it means i don't pay capital gains. Is there a given period he will have to move in for so we don't need to pay it?

As there is still a mortgage and you take it over(requires a full application)
That's fine, i understand mortgages a bit which is why i'd consider clearing it first rather than going though the whole process again

There will be a SDLT assessment (could be zero anyway)
Why would i pay stamp duty again? on all or just the half i'd be getting?
This makes me lean towards paying it off before starting the process of moving over

The gift will be a PET on dads estate lingers for 7 years
I've heard of the 7 year rule for people avoiding IHT and this is fine. Whats a PET?

getmore4less

SDLT consideration would be 1/2 the mortgage for CGT so could well be below the threshold anyway

You don't pay CGT he does.

depends how much the place has gone up and how long he lived there and did not live there less his allowance.

be easier once the mortgage is discharged you can just do the transfer with land registry forms. With a new mortgage you need to do a transfer of equity.

sukhi_1

Thanks! wow this is complicated

The house is worth around 150k so stamp duty would be on 75k which is under the 120k threshold
So he stands to pay CGT even if he's gifting it to me?

After the mortgage is cleared, is it just as simple as the land registry forms without capital gains and without the stamp duty confusion mess?

getmore4less

SDLT would be on 1/2 the mortgage if it is a gift with a mortgage as you are taking on the debt
with no mortgage no SDLT.

CGT is on any disposal including gifts.

Did you not get advice on this when you bought the place?

LMG1305

CGT would still be due even if the mortgage was cleared.

sheramber

I would suggest you would be better to post on the cutting tax board where there are people who can help you with CGT

http://forums.moneysavingexpert.com/forumdisplay.php?f=22

TBagpuss

CGT is on his 'gian' - the amount his share of the house had incresed.

Soif you bought the house for £100K and it is now worth £150K, the total gain is £50K. His half share is £25K, so the CGT would be payable on £25K, less any allowble expences, less his annual allowance.

the annual allowance is around £11K so if the house has gone up by less than £22K altogther there won't be any tax to pay.
He can only claim relief if the property is (or for periods where it was) his principal residence and he can only have one principal residence, - does he own a property elsewhere?

You might find this calculator useful in working out what he might be liable for http://www.uktaxcalculators.co.uk/capital-gains-tax-calculator.php

sukhi_1

Thanks for all the info, so i understand the SDLT a bit better now and will probably clear the mortgage before putting this into practice as it eliminates stamp duty and conversations with the bank

The house was bought for around 100k and it is around the 150k mark now (maybe a little less), but who's going to value it to determine its current value when working out the CGT?
For arguments sake say the house was actually valued at 150k and my dad is liable to pay this tax on his 25k. He's looking to retire next year so will have little to no income, so if we take his 11k allowance from the 25k share, it leaves 14k that is due tax at 18% basic rate which is £2520? is my understanding correct or is it better to do while he's still working?

Don't think i'm going to be able to go down the relief route as he has very little registered here, but i'm fine with leaving this out and keeping it simple.

I will post to the tax cutting board if i have more queries. If i do, will still update this afterwards in case someone is searching archives in the year 2025 for similar answers

Keep_pedalling

Do you know if the house is held as joint tenants or tenants in common?