Gifting a flat to my son

Natruth

30 years ago my husband and I bought our first home, a flat. When we remortgaged to a house we kept the flat, which we have finished paying for. We always said it was for my son.  He lives there with his partner, who has just finished her 5 years of visa applications from NZ and has indefinite leave to stay. This has been very expensive so thankfully they had the flat to live in as they have also had 2 children in this time. I now want to sign the property over to him, someone suggested this may not be a good idea if they wanted to move and get a mortgage, although they would sell and have a deposit. The property is worth about £80,000. I have my own house and am only in my early 50s. How do I go about doing this.?

SDLT_Geek

Natruth said:

30 years ago my husband and I bought our first home, a flat. When we remortgaged to a house we kept the flat, which we have finished paying for. We always said it was for my son.  He lives there with his partner, who has just finished her 5 years of visa applications from NZ and has indefinite leave to stay. This has been very expensive so thankfully they had the flat to live in as they have also had 2 children in this time. I now want to sign the property over to him, someone suggested this may not be a good idea if they wanted to move and get a mortgage, although they would sell and have a deposit. The property is worth about £80,000. I have my own house and am only in my early 50s. How do I go about doing this.?

The reason for the “not a very good idea” comment could be that if he is gifted the flat, he will not be a “first time buyer” for stamp duty land tax purposes.  That could mean £5,000 more SDLT for him than if you sold the flat and gave him cash.

There are plenty of other factors of course.

canaldumidi

I believe there are various other FTB benefits available as well as the SDLT mentioned, that he may become ineligible for if he is a property owner.

Other considerations are

* Capital Gains Tax- when you sell/give away your flat you will be liable for this, whether you do it now or in another 10 years (unless you die - CGT does not apply on death though Inheritance tax does). Of course the longer you keep it, the more it is likely to increase in value, and the greater your CGT liability.

* Inheritance Tax. If you die within 7 years of giving the flat away, its value will be included in your Estate for IHT purposes. Of course, if you keep the flat, that would also be true!

As an aside, has he been paying your rent? Either in cash or in kind (eg doing repairs/improvements to the flat, or walking your dog daily in return for the accomodation)? If so, you are a landlord with many legal responsibilities, including declaring the rent to HMRC........

But the answer to your question is that to transfer the flat to him is easy: Send forms AP1, TR1 & ID1 to the Land Registry, and a maybe a SDLT Return to HMRC (though no SDLT will be due if no money changes hands.)

As it's a flat you may need to get the lease assigned to him by the freeholder too.

https://www.gov.uk/government/publications/registered-titles-whole-transfer-tr1

https://www.gov.uk/guidance/stamp-duty-land-tax-online-and-paper-returns

Rosa_Damascena

Personally, I think this is a good idea. Its a roof over your son and family's head and will be a good start for when they do buy their first family property.

Selling up has its practical challenges, not least where you son and his family will move in the interim. As its not your main residence you would end up paying CGT which I suspect may be greater than your son would make by sacrificing FTB status.

london21

It is a good idea but communicate with your son also to get his input. 

Keep_pedalling

Be aware that you may be liable to have to pay capital gains tax on the transfer. How much did you pay for it and how long did you live in it?

Natruth

It was bought for £25,000 lived there for 10 years. Rented for 10 and my son has lived there for 10.

Thrugelmir

Did your son pay the mortgage on your behalf? 

Natruth

Are you suing the bus? Lol
No I paid the mortgage.

sammyjammy

Natruth said:

It was bought for £25,000 lived there for 10 years. Rented for 10 and my son has lived there for 10.

So it was bought for £25k 30 years ago and is now only worth £80k?  I know it differs area to area but my house value in Sheffield has increased from £29k to £190k in that time.

Keep_pedalling

Natruth said:

It was bought for £25,000 lived there for 10 years. Rented for 10 and my son has lived there for 10.

You have a gain of £55k and can claim 129 months (the time you lived there plus the last 9 months of ownership) of residential relief for the 360 months you have owned the property which reduces the taxable gain to around £35k. Assuming you own the property jointly with your husband and you have no other gains or losses for the year you each have an annual CG allowance of £11,300 so you each would have a taxable gain of £4,500.

Buying and selling costs can be deducted from your gain as can major expenditure such as adding an extension, but not ware and tear costs.