Joint tenant ownership and tax

Twilight1953

I am a 72 year old single mum considering transferring ownership of half my main residence (no mortgage) to my adult son who lives elsewhere. This is to reduce IHT since I will exceed the IHT allowances.
My questions are: can I continue to rent out rooms to lodgers (rentaroom scheme), and not share the income with my son? ie we would be 50/50 owners of the house, but only I would be responsible to HMRC for any tax due? Or is that not a problem since the rentaroom scheme is excluded from tax? 

NorthYorkie

Transferring a half-share in the ownership of your house will NOT reduce your potential Inheritance Tax liability.

Keep_pedalling

Not only will you not save IHT you will store up a potential capital gains tax liability for him, and if he does not already own his own home at least an additional 5% tax when he does buy his own place.

Have you taken into account the residential nil rate band that will take your IHT exemptions to £500k?

sheramber

Twilight1953 said:

I am a 72 year old single mum considering transferring ownership of half my main residence (no mortgage) to my adult son who lives elsewhere. This is to reduce IHT since I will exceed the IHT allowances.
My questions are: can I continue to rent out rooms to lodgers (rentaroom scheme), and not share the income with my son? ie we would be 50/50 owners of the house, but only I would be responsible to HMRC for any tax due? Or is that not a problem since the rentaroom scheme is excluded from tax? 

If you continue to live in the house it is a gift with reservation and does not remove it from  your IHT. 

Will your estate definitely be liable to IHzt?

MyRealNameToo

NorthYorkie said:

Transferring a half-share in the ownership of your house will NOT reduce your potential Inheritance Tax liability.

Lets assume they die more than 7 years from now why not?

A joint tenancy would mean the property transfers to the remaining joint tenants without forming part of the estate. 

MeteredOut

MyRealNameToo said:

NorthYorkie said:

Transferring a half-share in the ownership of your house will NOT reduce your potential Inheritance Tax liability.

Lets assume they die more than 7 years from now why not?

A joint tenancy would mean the property transfers to the remaining joint tenants without forming part of the estate. 

As stated above, read into Gift with Reservation

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04071

RAS

And of course the son is liable for CGT for any gain on his portion.

MyRealNameToo

MeteredOut said:

MyRealNameToo said:

NorthYorkie said:

Transferring a half-share in the ownership of your house will NOT reduce your potential Inheritance Tax liability.

Lets assume they die more than 7 years from now why not?

A joint tenancy would mean the property transfers to the remaining joint tenants without forming part of the estate. 

As stated above, read into Gift with Reservation

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04071

Cheers           

Twilight1953

Thanks everyone. My first time here so forgive any lapses in etiquette! I definitely will be liable for IHT on the total value of property. I don't understand why giving away half of my home would not remove that half from my estate? 

And is it a GROB if if am living in a house I co-own.. since I'm not giving all of it away? 

Yes I realise that my son would face CGT for the 50% of increased value in the period between my transfer of part ownership to him and my death (when he would dispose of the house).
I understood that with joint tenant ownership the surviving tenant inherits automatically and that my half of the house would be added to my estate for IHT...obviously I would still pay IHT on my half. 

Is that right?

MyRealNameToo

If you look at the link provided it explains but yes, because you will continue to live in it/ that your son couldn't just sell it tomorrow if they wanted that its not treated like a normal gift... obviously if you give your son something else he can do what the hell he wants with it. 

Twilight1953

Myreelnametoo - I read the link - thanks. That is referring to transfer of whole property, yes? If I continue to own (and pay IHT on) my half of the house why is that a GROB? 

And yes if I croak before 7 years are up it wouldn't help much!