Tax implications on second property

Crashy_Time

Poppyhead wrote: »

One more point re Crashy - why on earth would you want £400k in savings? What's the point?

More freedom and choice, less days at work, being able to own a car without paying into the debt Ponzi every month for the privilege etc. etc. The fact that you need to ask, and seem to think that this money should immediately be channelled into property says everything about the brainwashing that has gone on regarding property as an "investment"! Shocking really IMO.

Poppyhead

Conrad, many thanks for your reply, that puts a different aspect into view. I'm not really looking to make any profit on this but on the other hand I don't want a significant loss either. So if we stick with buying it as a second property and daughter repays us the purchase costs (I think about £10k all in) we would only pay tax on that £10k? Is that right? If we then sold the property at a later date for around the purchase price (it's only going to be a 1-2 bed flat and not in London so I can't see it increasing much anyway) there would be minimal CGT? Is that right? The £10K that we get repaid would only equate to one yrs rent so it is a bargain for child!

Poppyhead

Crashy I am retired. I don't work at all, any day of week. I have a final salary pension, own my own home and have no other debts. I don't need £400k in the bank. It is a complete waste when it could be put to use. I don't need to watch it grow to a bigger ever pot. I've done my time saving and now is time to spend. We are all at different stages of life and have different plans accordingly.

Crashy_Time

Poppyhead wrote: »

Crashy I am retired. I don't work at all, any day of week. I have a final salary pension, own my own home and have no other debts. I don't need £400k in the bank. It is a complete waste when it could be put to use. I don't need to watch it grow to a bigger ever pot. I've done my time saving and now is time to spend. We are all at different stages of life and have different plans accordingly.

Great! If more people took this approach the housing market would be saved?

Conrad

Poppyhead wrote: »

Conrad, many thanks for your reply, that puts a different aspect into view. I'm not really looking to make any profit on this but on the other hand I don't want a significant loss either. So if we stick with buying it as a second property and daughter repays us the purchase costs (I think about £10k all in) we would only pay tax on that £10k? Is that right? If we then sold the property at a later date for around the purchase price (it's only going to be a 1-2 bed flat and not in London so I can't see it increasing much anyway) there would be minimal CGT? Is that right? The £10K that we get repaid would only equate to one yrs rent so it is a bargain for child!

Yes, that's all correct.
Remember you each have an annual CGT allowance anyway so you could sell for a bit more and not incur CGT.


I find brand new flats, as long as not unreasonably over priced, make a good investment in terms of minimal maintenance and repairs. Never forget what investors call 'the sleep at night premium' which I live by - all to often people invest in things that generate too much hassle and stress such as an old flat or still worse a holiday home they let out - nightmare.


New flats tend to have longer leases, I just picked up a Bellway Homes flat with a 250 yr lease.


I know a number of people that invested in villas or Cornish cottages and found it was non stop hassle and worry (not so bad if just for personal use, but even then I would find myself doing jobs, gardening and repairs every time I used the place).


If you get a 2 bed, your Daughter might sub-let one room for a bit of personal income, just a thought, but make sure any contract with regards sub-tenants is watertight in terms of things like Boyfriends staying over, placing extra ware on the shower and so on.


I find 2 bed flats currently more profitable than 1 beds per dollar sweated but that's not really relevant as you say it's not about max returns

Crashy_Time

Conrad wrote: »

Yes, that's all correct.
Remember you each have an annual CGT allowance anyway so you could sell for a bit more and not incur CGT.


I find brand new flats, as long as not unreasonably over priced, make a good investment in terms of minimal maintenance and repairs. Never forget what investors call 'the sleep at night premium' which I live by - all to often people invest in things that generate too much hassle and stress such as an old flat or still worse a holiday home they let out - nightmare.


New flats tend to have longer leases, I just picked up a Bellway Homes flat with a 250 yr lease.


I know a number of people that invested in villas or Cornish cottages and found it was non stop hassle and worry (not so bad if just for personal use, but even then I would find myself doing jobs, gardening and repairs every time I used the place).


If you get a 2 bed, your Daughter might sub-let one room for a bit of personal income, just a thought, but make sure any contract with regards sub-tenants is watertight in terms of things like Boyfriends staying over, placing extra ware on the shower and so on.


I find 2 bed flats currently more profitable than 1 beds per dollar sweated but that's not really relevant as you say it's not about max returns

Is that a technical term? There are some landlords over at Property 118 who definitely seem sweated.

00ec25

Conrad wrote: »

People mention CGT if your Daughter buys the property off you at a future date, but you could in theory sell it to her in 5 years time for the same sort of price your are paying for it, indeed for a bit more and no CGT liability would be incurred.

I've seen 'sale under value' transactions a thousands times and never once has HMRC queried.

you may well have "seen" such transactions, but I hope you were not party to or facilitated them as an "under value" sale to a connected party is CGT fraud, pure and simple

the rule is black and white: connected party sales must use market value, not what was actually paid

kinger101

Poppy.....please ignore Crashy. He highjacks every thread he can with his bitter resentment that he's still living in a squalid bedsit in stained underpants in his mid fifties. It's not worth engaging in conversation with him because of his undue bias. It's often said on this forum that he's predicted every 15 of the last 2 property crashes (or something similar) if you catch my drift.

Poppyhead

He is ignored! I'm really looking a buying a home not an investment so price crash or not it doesn't make much difference unless you want to sell. If a crash is looming then I think having secure,cost free accommodation can only be a blessing. If a crash results in unemployment then at least there's no rent/mortgage to worry about.

OOec25 - fraud? I wouldn't want to commit fraud! I had no idea, as I said previously, I'm not used to this complicated stuff. Thank you for mentioning that, I'm not planning on spending my retirement as a guest of her majesty.

Poppyhead

Can I ask another question? I've only just thought of it. If I arrange a private mortgage, what would happen if either of us went into a nursing home? Would the outstanding debt be considered as part of our estate? I expect it would. So could child end up losing the property even though it is in their name? I hope it will never come to a care home scenario, I'd rather jump of a mountain but unfortunately things aren't always so clear cut. Could I gift them a percentage of the property so that they would be able to keep part of it?