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Where Taxpayers and Advisers Meet

Gifting rental property to son and he to sell, CGT implications

greenfingersx
Posts:2
Joined:Fri Jun 02, 2017 2:25 pm
Gifting rental property to son and he to sell, CGT implications

Postby greenfingersx » Fri Jun 02, 2017 2:32 pm

Hiya

A rental property we bought years ago for about 200k, now worth 500k.
We want to gift this to our married son and he is already living in it.

We will pay CGT if we gift it to him at 28% as we are higher rate taxpayers.

Question: If a few years down the road our son decides to sell up (still his main residence) and move and lets assume the property is now worth 600k after improvements and costs, will the 100k be treated as CGT therefore needing to pay CGT ?

If the above is true, ie our son having to pay cGT on the 100k - would you recommed we sold the property and gave him the case as a gift on the 7 IHT route and also we pay the CGT

I hope I'm clear.

Thanks in advance.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Gifting rental property to son and he to sell, CGT implications

Postby maths » Sun Jun 04, 2017 3:15 pm

If son lives in property as his sole/main residence from the date you gift it to him until date he sells then he will be exposed to no CGT due to so-called main residence relief.

greenfingersx
Posts:2
Joined:Fri Jun 02, 2017 2:25 pm

Re: Gifting rental property to son and he to sell, CGT implications

Postby greenfingersx » Sun Jun 04, 2017 7:15 pm

Mant thanks. I did eventually work it out myself as I misread the gov site but appreciated nevertheless!

Final question - The CGT will be more this year and less next year as both me and my wife intend to retire. If our son paid the CGT, what is the best way to do that, ie does he just pay it, or we give hime the property a bit cheaper but then again he may incur CGT on that part - thanks again

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Gifting rental property to son and he to sell, CGT implications

Postby AGoodman » Mon Jun 05, 2017 2:59 pm

Not sure that I understand the question as I don't see how you can give him the property cheaper than free.

Assuming you cannot just wait until next year, the two options are either: (a) he simply pays the tax on your behalf - that could be seen as a gift on his part or (b) he buys the property from you for £100k (or whatever the CGT is).

If the latter, there should be no SDLT but your gift would be reduced from £500k to £400k - this would only prove helpful if one of you died within 7 years as it reduces the value of the potentially exempt transfer.

The CGT position would be the same but you would have the cash to pay it so your son would not have made a gift.


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