Property in children's name

LeroyBoyce

Hello all,

Due to personal circumstances changing, I'm now in possession of a rental property.

I refused to sell it as it was built to be our children's inheritance.

Now I own it, I would like to maximize it's earning income for my children (7 and 10).

My intention is to take zero money from the rent, instead, at the end of each year, split the profit in half and place it in my cihldren's bank accounts each year until they are 18, at which point the money will be made available to them, as well as them taking over ownership of the house.

With this in mind, how would the tax work out? The rental income is £13200 per year, and the mortgage is around £4800 per year.

I am thinking I should transfer the house into their names? Is this possible if they are both so young? If this is acceptable, I'm assuming they will pay less tax on it?

Many thanks for your help.


Lee

Keep_pedalling

Minors cannot own property so you can’t transfer to them. You could put it in a trust, but frankly there are better ways to save for children than in an illiquid asset like property where you face things like capital gains tax when you transfer or sell it.

If you hang on and transfer it when they are are adults, then you would take away there first time buyers status so they would pay significantly more tax when buying their own home.

BoGoF

To answer your first point regardless of what you do with the money it is your taxable income.

xylophone

Minors cannot legally own real estate - it would have to be held in Trust.

As you (parent) would be gifting the asset into Trust for your minor unmarried children, the "parental settlement" rules would apply.


https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4300

https://www.boltburdon.co.uk/yourlife/wealth-planning/trusts/parental-trusts-minors/

Rather than the above, could you not consider making the maximum contribution each year to each child's CTF/JISA from your rental income?

These are not affected by the parental settlement rules.

LeroyBoyce

xylophone wrote: »

Minors cannot legally own real estate - it would have to be held in Trust.

As you (parent) would be gifting the asset into Trust for your minor unmarried children, the "parental settlement" rules would apply.



Rather than the above, could you not consider making the maximum contribution each year to each child's CTF/JISA from your rental income?

These are not affected by the parental settlement rules.

Yes, I'm keen to do that. Would I still have to pay tax on the income, if it is going straight to the children's accounts?

xylophone

Would I still have to pay tax on the income, if it is going straight to the children's accounts?

It would still be your income so you would pay any tax due.

However, once in the JISA, the children would be benefiting from tax free interest/growth.