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  • Tax

    Property gifting to children

    Need some advice on gifting a BTL property to my 2 children at university, so that we can pay their fees out of the rental, thereby using their annual income allowances.

    Cannot make outright gift due to the large CGT bill.

    Been advised to consider a Discretionary trust, however, not something I understand very well and I am not sure of the long term implications.

    I have thought of part gifting a small % each year and then allocating them with a proportion of the rental income, which I think does not need to be relative to the % of the property owned?

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    Trust would work but CGT would follow asset. Small % each year to use annual exemption would wash out CGT also!

    For sharing of income, See jointly owned property no partnership here. https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030

    Deb 

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    Thanks Debbie. A % each year seems better for us, however, will the property be IHT exempt if we survive 7 years?

    Looked at the above manual - very complicated for me! Would I be right in saying we could decide what % of the rent to gift to the children?

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    Hi

    For the outright gift of % each year you need to survive each gift by seven years to remove the value of that gift from your Estate.

    For income, yes the guidance says that joint owners can agree to share profits in different proportion than ownership (unless they are a spouse).

    Deb

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Thanks again Debbie, you are very knowledgeable Smile

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    If I currently hold BTL properties as Joint Tenants with my wife rather than Tenants in Common, is transfer via Trust to children (they are over 18) still appropriate....and can I use the small %age per year approach to wash out the CGT?

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    That's a point - should the property be held as joint tenants or tenants in common before gifting a % ?

    Do I need a solicitor for the annual % transfer or can i do this myself at land registry ?

    Only downside I guess is that the property will not be "protected" in case of martial breakdown or litigation in future (unlike in a trust) & they would lose their first time buyer benefits?

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    Hi there, we provide specialist tax strategies to protect investors from CGT. As i am new to the forum i am not aure how we could communicate so that i can elaborate. Please let me know if you would like to know more about this

    Regards

    Ian

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