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  • Tax

    Allocating some BTL income to our son

    Our son will be starting university soon and we need to use his personal allowance.

    We were thinking of gifting a percentage of our btl property to him every year, thus utilising our cgt allowance and allocating some of the rental income to him.

    Any thoughts plesae.....

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    I did a similar thing with two of my properties.  Unfortunately, it is not as straight forward as you think. 

    Firstly you will have to gift a share of the property to your son (which will incur CGT for you) and he will have to pay 3% stamp duty on the share he takes from you.  And, now with the new tax rules, my son's share of the properties has increased his income and thus he has to pay 40% tax.   

    In all I paid quite substantial CGT for doing this. If there is a simpler way of doing it I would be interested to know.

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    I was thinking of gifting a percentage equivalent to our joint cgt allowance & we could do this every year until it passes cgt free?

    Another option we were told would be to gift in a ltd co?

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    NB. The gifted share would be below £125k so there should be no stamp duty?

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    But on completion of the transfer, one of the owners of the property (you) would own more than one residential property and so the stamp duty surcharge applies to the market value of the property.

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    would this be dependant upon the value of the gifted portion only?

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    I think 3% SD would apply to 100% of the gifted portion - as it does for any second home purchase

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    No stamp duty on gifts unless there is a debt attached to the property in which case the consideration for stamp duty is the proportion of the mortgage representing the share of the property he is receiving.

    E.g Mortgage of £300k, transferring 50% to Son, stamp duty calculated on £150k. If mortgage free no stamp duty if a gift.

    Debbie

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    Thanks Debbie Smile

    So this is best done whilst property is mortgage free?

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    Absolutely!

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA