Tax on selling gifted buy to let property.

Supercalafragalistic

I’ve got a buy to let property that i’ve had for years just in my name...no mortgage on it anymore.

Now am thinking of putting my wife’s name on it on joint tenancy basis....she can then have it if i pop my clogs, without going through probate.(also handy for tax as she doesnt work)

There is no money changing hands, and no stamp duty to pay apparently.

Is there any downside to this in the future....ie if i pop off , and she decides to sell, will there be any extra taxes to pay over and above if i had just left it in my will.

Thanks

00ec25

- you are married
- the share of ownership (%) transferred to her will be deemed to have been made at your ORIGINAL purchase price - ie whatever you paid whenever long ago you bought the property yourself


CGT position if joint ownership - property SOLD
when the place is sold she will calculate her CGT liability in the same way as you will: (selling price - costs - original purchase price) x % owned = £x liable per person - CGT allowance per person = taxable gain per person
CGT payable at a mix of some at 18% and some at 28% depending on the size of each person's gain relative to the total income for each person. In others she may pay less CGT than you if she has less income than you at point of sale


the above assumes you have NEVER lived in the property as your main home, either before or after marriage to her. If you have, the implications are very different


CGT position if joint ownership - you die, she inherits. Sale?
Her position depends entirely on when the property is sold after your death. If sold on death she would account for CGT on the % share she held from date of gift to date of sale
Your % share would form part of your IHT and would not be subject to CGT


CGT position - joint ownership until you die, but she sells well after death
She would have 2 positions:
a) a % share whose gain would be from date of gift to date of sale
and
b) a % share she inherited on your death at probate value whose gain is from probate value to date of sale . If your estate paid IHT on your death that gain is confirmed based on the value used for IHT. If you did not pay IHT, the gain is open to argument over probate valuation


No joint ownership - you die, she inherits and sells
She is not an owner pre death so has no right at all to any of the renal income
Upon your death your estate may or may not have to pay IHT
She acquires the property 100% at probate value (same caveat above re whether IHT paid to confirm that figure)
She will pay CGT based on gain from date of death


Comparison
CGT is max 28% on the gain but has a small tax free allowance (currently £12,500)
IHT is 40% but has substantial allowances and of course may be 0 if estate is below the threshold anyway


so if she is not an owner and inherits on your death, in theory she'd pay less tax overall as her CGT would be over a shorter period so the gain may be less (depending on market conditions obviously). However, that ignores whether your estate had to pay IHT


Conclusion
without some figures re your IHT position, a true comparison is meaningless

Supercalafragalistic

I cant believe you have given such a full and clear answer! Thankyou so much for going to all that trouble, so kind.
I do have a couple of points to clear up however...not because you are unclear, just because I am a bit slow on these matters, so i have been cheeky and put the questions in below your words....





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00ec25 wrote: »

- you are married
- the share of ownership (%) transferred to her will be deemed to have been made at your ORIGINAL purchase price - ie whatever you paid whenever long ago you bought the property yourself



CGT position if joint ownership - property SOLD
when the place is sold she will calculate her CGT liability in the same way as you will: (selling price - costs - original purchase price) x % owned = £x liable per person - CGT allowance per person = taxable gain per person

( as she will be paying nothing, do they count the cost i paid for it, or do they do it as she pais nothing thereby hiking up the chargeable gain?)

CGT payable at a mix of some at 18% and some at 28% depending on the size of each person's gain relative to the total income for each person. In others she may pay less CGT than you if she has less income than you at point of sale


the above assumes you have NEVER lived in the property as your main home, either before or after marriage to her. If you have, the implications are very different

No i never lived in the property


CGT position if joint ownership - you die, she inherits. Sale?
Her position depends entirely on when the property is sold after your death. If sold on death she would account for CGT on the % share she held from date of gift to date of sale
Your % share would form part of your IHT and would not be subject to CGT

]If joint tenancy, does it still form part of iht (which is fine as i am leaving her everything anyway...) but i just wondered. If this is the case she will be better selling it on my death (although not sure how to do this..put it up for sale, exchange , complete, then tell dignitas to inject me ��)[/SIZE]

CGT position - joint ownership until you die, but she sells well after death
She would have 2 positions:
a) a % share whose gain would be from date of gift to date of sale
and
b) a % share she inherited on your death at probate value whose gain is from probate value to date of sale . If your estate paid IHT on your death that gain is confirmed based on the value used for IHT. If you did not pay IHT, the gain is open to argument over probate valuation


No joint ownership - you die, she inherits and sells
She is not an owner pre death so has no right at all to any of the renal income
Upon your death your estate may or may not have to pay IHT
She acquires the property 100% at probate value (same caveat above re whether IHT paid to confirm that figure)
She will pay CGT based on gain from date of death
This seems better then really....but i dont want anyone contesting the will, hence the thoughts about giving it to her now.

Comparison
CGT is max 28% on the gain but has a small tax free allowance (currently £12,500)
IHT is 40% but has substantial allowances and of course may be 0 if estate is below the threshold anyway


so if she is not an owner and inherits on your death, in theory she'd pay less tax overall as her CGT would be over a shorter period so the gain may be less (depending on market conditions obviously). However, that ignores whether your estate had to pay IHT.
Shouldnt do as have 1 child who is estranged and has been catered for already, and want to leave everything to my wife.


Conclusion
without some figures re your IHT position, a true comparison is meaningless

So pleased i checked. I had it in my mind from somewhere that hmrc treated gifts from spouses as though the spouse had been in the same position as husband...ie paid the same , held the assetts for the same length of time etc. Again, how kind of you to do this..its brilliant.

AnotherJoe

As she will be paying nothing, do they count the cost i paid for it, or do they do it as she paid nothing thereby hiking up the chargeable gain?

The cost you paid for it.

00ec25

long time since I did IHT seriously, not my area these days ....

joint tenancy and IHT - please see what others say about this - can't be bothered to look it up at the moment

CGT cost - yes, she gets it for what you paid for it, although HMRC prefer a more wordy explanation, the so called no gain, no loss rule
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

(But she does not get any claim you may have in your own name to main residence relief on that property)

Supercalafragalistic

AnotherJoe wrote: »

The cost you paid for it.

Thanks for the answer. In my original post, one of the answers given was this..

..”CGT position - joint ownership until you die, but she sells well after death
She would have 2 positions:
a) a % share whose gain would be from date of gift to date of sale
and
b) a % share she inherited on your death at probate value whose gain is from probate value to date of sale . If your estate paid IHT on your death that gain is confirmed based on the value used for IHT. If you did not pay IHT, the gain is open to argument over probate valuation “

As we are going ‘joint ‘ tenancy, i understand we do not hold a percentage each, but rather hold full ownership between us,
And as there will be no iht to pay as i am leaving it all to my wife, is the following calc correct please?
I paid 20k for property.
Wife sells it for say 120k after i have gone
Gain is 100k
But 50k comes under my (i dont know the term) but death/iht doodah, even though there is none to pay
50k is then her chargeable gain-relevant allowances,.

Is that about right please?
Or will her gain be 100k -relevant allowances?
Thanks

jimmo

Also posted on your other thread;
Try again but assume:
Original purchase £20k
Value of entire property at the date of your death £100k
Subsequent sale £130k.

If you gift a half share to your wife now she will acquire it at £10k
You will retain your half share which cost you £10k.

When you die your wife will inherit your half share at probate value £50k
She will then own the whole house at a cost of (10+50) £60k
If she sells that for £130k she will have a capital gain of (130-60) £70k.

If you retain ownership of the whole house until you die your wife will inherit the whole at £100k and when she sells that for £130k she will have a capital gain of £30k.

Does that make it any clearer?

Supercalafragalistic

jimmo wrote: »

Also posted on your other thread;
Try again but assume:
Original purchase £20k
Value of entire property at the date of your death £100k
Subsequent sale £130k.

If you gift a half share to your wife now she will acquire it at £10k
You will retain your half share which cost you £10k.

When you die your wife will inherit your half share at probate value £50k
She will then own the whole house at a cost of (10+50) £60k
If she sells that for £130k she will have a capital gain of (130-60) £70k.

If you retain ownership of the whole house until you die your wife will inherit the whole at £100k and when she sells that for £130k she will have a capital gain of £30k.

Does that make it any clearer?

Much much clearer . Thanks very much and excuse my denseness!