no longer being a landlord + tax

PoGee

As I near retirement, I've realised I no longer wish to be a landlord. I own a couple of rental properties outright. If kids move into each rent free, with their responsibility to pay utilities, CT, insurance, repair bills, communal charges etc., do I still need to be registered as a landlord? If I receive no rental income, is it deemed that I am making them monetary gifts in the eyes of tax purposes? Both properties are up to date with gas/ electrical checks and other landlord requirements.

PoGee

Would putting them in trust be the best way forward?

GrumpyDil

Do you need to keep the properties or would it make sense to sell them?

There will be CGT to pay but that will be an issue at some point anyway.

Keep_pedalling

PoGee said:

Would putting them in trust be the best way forward?

No, it would just complicate things and CGT would also be an issue both on the transfer and down the line when the houses were eventually sold by the trust.GrumpyDil said:

Do you need to keep the properties or would it make sense to sell them?

There will be CGT to pay but that will be an issue at some point anyway.

It would not be payable if the OP owned them until their death, but of cause IHT might be payable then depending on the value of their entire estate.

Keep_pedalling

Allowing your children to live their rent free will not count as gifting under the IHT rules, but you will still has some responsibilities as a landlord such as annual safety checks.

If IHT is a concern then disposing of the rental properties and making cash gifts may be the better option. What is your approximate net worth and what is you marital status?

PoGee

Thank you for replies. There will be IHT to pay if I hold onto them till death. Kids like location of properties and they'd be getting them anyway from my estate. I don't know where I stand in the meantime - they want to live there and I don't want to charge rent.

PoGee

Keep_pedalling said:

Allowing your children to live their rent free will not count as gifting under the IHT rules, but you will still has some responsibilities as a landlord such as annual safety checks.

If IHT is a concern then disposing of the rental properties and making cash gifts may be the better option. What is your approximate net worth and what is you marital status?

I'm single. Properties, including my own home, are worth £620k. One rental £220k, other £80k. Child 2 could afford a mortgage with property 2 and minimal CGT but 1st one is outwith child 1's income. I can take a couple of over 50s life cover (or normal life insurance) and have it 'ring fenced' so that there is some cash to pay IHT. 
Before I 'go' - It was income tax purposes that I wondered whether may cause problems? 

Grumpy_chap

It might be worth the OP taking some professional advice.

The OP's estate is above the £500k IHT allowance (including residential NRB). 

The OP describes themselves as "single" but, given there are two children, there was presumably a partner in the past.  If the partner was a spouse and deceased, then the available IHT threshold may be higher.  Different if never married or divorced.

The OP also needs to consider the available cash (including readily convertible to cash, e.g. shares) within their assets.  If there is insufficient cash to fund future care needs, then the current rental properties may need to be sold to fund care.  It will be a difficult decision as to which of the children to ask to yield their home.

Does the Will reflect the two rental properties having different values and seek to equalise at death?

PoGee

Thanks for replies. I'm divorced. The will does equalise estate. But hope someone can advise re whether allowing kids to live rent free in properties that have been generating rental income, will cause any issues with my own income tax, kids income tax and perhaps rent free being considered as gifts. They want to move in in late 2024.

Sea_Shell

PoGee said:

Thanks for replies. I'm divorced. The will does equalise estate. But hope someone can advise re whether allowing kids to live rent free in properties that have been generating rental income, will cause any issues with my own income tax, kids income tax and perhaps rent free being considered as gifts. They want to move in in late 2024.

So, how would that work, if the one living in the dearer house "owes" the other?

Are you planning for your estate to have enough cash to enable them to equal split?

Eg Cash plus "little" house= 50%
"Big" house = 50%

molerat

There will be no tax problems, you will simply be receiving a reduced income and declaring it.  You may have to carry on completing SA, they don't seem to react to changes in circumstances very quickly and there may of course be some questions over the reasons for the sudden reduced rental income but that will be easily explained.