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Where Taxpayers and Advisers Meet

Is tax shared equally?

lunar
Posts:16
Joined:Sat Jun 13, 2015 1:19 pm
Is tax shared equally?

Postby lunar » Sun Jan 20, 2019 9:46 am

Hi.
My wife and I have a 50% share in two properties that we let out. I am a higher rate tax payer (40%).
In order to reduce my tax bill can I (via a solicitor) include two of my children to the property ownership, so that all four of us would own a quarter of the properties. They are both over 18 years and both in full time education.
Hence, I would be liable for 25% of the property income.
The other three do not work and would pay nothing due to the £11500 allowance.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Is tax shared equally?

Postby bd6759 » Sun Jan 20, 2019 2:01 pm

Yes, what you are saying will work. But there are downsides:

Giving 50% 0f the property to your children will be a disposal for capital gains tax purposes.

Not only will it will affect your children's access to first time buyer relief for SDLT, and will also mean they will be liable to the extra 3% when they buy their own homes.

Your children could sell their share of the property at any time to fund whatever lifestyle they choose. You would not be able to prevent that.


Might be better to give your wife 99% ownership, but you need tailored advice to see what is best for you,

lunar
Posts:16
Joined:Sat Jun 13, 2015 1:19 pm

Re: Is tax shared equally?

Postby lunar » Sun Jan 20, 2019 10:49 pm

Sorry, a little confused.
If i 'dispose' of 50% to my children I have not made any profit, so why should this incur cgt. Surely, the properties would need to be sold; only then could I afford to pay the tax.

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

Re: Is tax shared equally?

Postby AGoodman » Mon Jan 21, 2019 11:37 am

A gift is a disposal as well - and deemed to take place at market value. It is effectively treated as a sale at MV for capital gains tax.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Is tax shared equally?

Postby bd6759 » Mon Jan 21, 2019 10:06 pm

Sorry, a little confused.
If i 'dispose' of 50% to my children I have not made any profit, so why should this incur cgt. Surely, the properties would need to be sold; only then could I afford to pay the tax.
This was explained 2 years ago

https://www.taxationweb.co.uk/forum/selling-property-to-daughter-t51186.html

Mason1880
Posts:13
Joined:Fri Apr 13, 2018 8:32 am

Re: Is tax shared equally?

Postby Mason1880 » Thu Feb 07, 2019 10:01 am

Why not transfer ownership to your wife instead if she would remain a lower rate tax payer? I believe this may be possible through a deed of trust?


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