how can I reduce Capital Gains Tax

Katykat

This is our position. Myself and husband own our home, no mortgage. Daughter wants to buy a house but cant afford to on her own. We have decided to buy a house jointly, probably her 75% and me and husband 25%. We all work and pay tax at basic rate. Daughter intends to buy us out in about 2-3 yrs. She will be living in the house alone, we will be paying the mortgage jointly ( ie 75/25%) and taking 25% of market value at point of resale.
Is it better to register the deeds in her name only, or in all 3 names and then transfer it to her name on resale?
We intend to keep ALL receipts, but what exactly qualifies to be offset?
Is there any legal way we can keep CGT to minimum or better still avoid it? :wave: :wave:

sneekymum

Since there's going to be a mortgage and some lender's goint to agree to lend the money you'll probably find you can't avoid having everyone's name on the deeds - thou this is not necessarily a bad thing as you daughter will not be liable for any CGT (main residence) and you + husband have an annual CGT allowance of £8,200 this year - so if daughter's going to buy you out in the next few years its unlikely that you'll see a 25% of total capital growth in excess of £16,400 after expenses. (= total rise of over £56,000).

In our family we would go for the single name option as we all trust each other and its just less complicated for tax - though if you have other children they might feel robbed should you die leaving that 25% equity unresolved. Also, to keep it in one name your daughter would have to get a mortgage for a greater amount based on her own earnings - that may be difficult - although you might be able to offer to underwrite it for her (my father did this for us many years ago - but then that was for the full amount - not a portion).

Katykat

thanks sneakymum, but could I clarify something? Do you mean that if the deeds are in daughters name only, but mortgage is in joint names ( providing Bank does not insist otherwise) then when she buys our share, it wouldn't be an official sale. It has been suggested that we act as guarantors with our salaries counting towards the mortgage agreement, but we would still have to pay a proportion of the monthly repayments. Would this still be viewed as capital gains when she takes on the full mortgage herself?

sneekymum

As far as I can see (and as a interested amateur tax avoider and in no way professionally qualified) the house being in your daughter's name only makes it hers alone as far as the IR is concerned. Unless they bug your house there's no way they can know about any other personal arrangements. The repayment of your mortgage contributions are simply a repaymnet of a loan from you. Any extra accrued would be a gift.

Looking at it the other way round - supposing you make a loss after a couple of years, and the property is in your daughter's name only - how likely do you think it would be that the IR would allow you to count such a loss against any other Capital Gain you make that same year?