Gifting second home to 2 children

gwioniwan

Hope someone can help me!
Im 65 and am luckly enough to own 2 properties.

I want to gift my second house (which ive never liven in) to my two grown up children. Im aware of the 7 year rule of Inheritance Tax ect (my estate isnt worth more than the threshold anyway!) Just want the children to enjoy the money now when they have young family and money might be tight. .

The house is valued at £200k. It cost me around £150k to build around 5 years ago.

Each child gets half each but the plan is for the youngest child to have it as his home and mortgage the house for £100k and give it to his brother. There is no mortgage on the house at the moment.

My questions are;

1) What the best approach here?
a) Gift the whole house to youngest child, him mortgage for £100k and give to his brother?
b) Gift the house to both of them and youngest buy half of the house from the eldest?
c) Gift it to Eldest and him sell it for a under-valued amount of £100k?

2) Based on above, whats the tax liabili to for me/youngest/eldest?
a) I would assume there is CGT on the £50k profit on the house? What about the £100k youngest givest the oldest?

If someone could help guide me in the right direction!

Who should I seek advise from? Is it

- Accountant?
- Solicitor?

Soooooo confused!

Keep_pedalling

I would sell and split the proceeds rather then lumber them with such a complex set up. Yes you will have a CGT liability.

silvercar

You don't want to saddle the elder child with having been a home owner, it could prevent any help to buy initiatives in the future.

Let the younger son buy it off you with the deposit £100k as a gift. You then gift the £100k to the elder son.

Linton

Does the younger child actually want that house in that location in preference to any of the others that could be bought with the same amount of money? Can you really afford to give the house away? Have you considered your possible care needs in later old age?


The best answer could be to sell the house and split the money between your children and if necessary yourself.

trailingspouse

How will the one who doesn't get the house feel when his sibling is sitting in a house that is appreciating in value but his £100,000 is being eroded by inflation or has been spent on things that don't appreciate in value?

gwioniwan

Thanks all.

The eldest son already has a house so the risk of not getting future help to buy isn't relevant.

The youngest really wants to live there. It's actually right next to our house and houses in the village rarely go on the market.

Youngest buying off us (us giving him £100k) and then us giving eldest £100k sounds sensible.

If we gift £100k to youngest (ie selling him a £200k house for £100k) is there any taxes to be paid on this?

Then if we give the £100k we get for the house to the eldest, again what's the taxes?

I've considered our future care needs ect and happy we are set for that as we have some money saved and also have decent pensions ect.

Thanks for your continued help on thia.

00ec25

gwioniwan wrote: »

Hope someone can help me!
Im 65 and am luckly enough to own 2 properties.

I want to gift my second house (which ive never liven in)

so you must already be aware of CGT when you decided to keep a 2nd property yourself

gwioniwan wrote: »

If we gift £100k to youngest (ie selling him a £200k house for £100k) is there any taxes to be paid on this?

Then if we give the £100k we get for the house to the eldest, again what's the taxes?

you will pay CGT on the gain between original purchase cost and current open market value (not the 100K son pays you). You will have your (ie each person's if jointly owned) CGT allowance to offset against your respective shares of the gain

does youngest son already own a property? if yes will he sell it when buying yours? That son may have to pay SDLT based on his actual circs (£0 if no house because the tax would be on the 100k he pays as that is below the threshold)

gift to eldest - no immediate tax, but counts as a PET against your IHT, ie you must live for another 7 years or it reverts to being part of your estate

gwioniwan

Thanks All.

So looks like I should sell the house to the youngest (who doesn't have a house of his own). I'll pay the CGT on this but there isn't a amount as house is relatively new. I'll then gift £100k and take my vitamins and cut out the red meat and aim for another 7 years to escape IHT! Estate not massive anyway so don't think this will be an issue.

SDLT_Geek

00ec25 wrote: »

does youngest son already own a property? if yes will he sell it when buying yours? That son may have to pay SDLT based on his actual circs (£0 if no house because the tax would be on the 100k he pays as that is below the threshold)

There are lots of issues to consider, but one route being suggested to you is that you sell a property worth £200K to your youngest son for £100,000, with him borrowing the money. Your son will need to find a lender who is happy to lend on that basis.

The stamp duty land tax treatment of your youngest son's purchase will depend on how the purchase is structured:

(a) If as a "gifted deposit" then you are treated as gifting him £100,000 and he buys from you for £200,000.
(b) If as a "concessionary purchase" he is buying from you at undervalue, so the "chargeable consideration" is £100,000.
There is an article about the differences here: https://www.blakemorgan.co.uk/news-events/blog/bank-mum-and-dad-concessionary-purchases/

Perhaps in your case it does not matter if your son would qualify for first time buyers' relief, there is more about that here: https://www.blakemorgan.co.uk/news-events/blog/sdlt-first-time-buyers-relief/