This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Buy to let property owned

170872
Posts:75
Joined:Wed Aug 06, 2008 3:41 pm
Buy to let property owned

Postby 170872 » Tue Apr 12, 2022 12:18 pm

I wanted to ask what is the best option available for someone who owns one buy to let a flat in personal name and is 80 years old.

He has a son .

Considering his age is it wise to do a tax planning now so that there is no huge tax bill when he passes away?

What is the best options and would appreciate you views

Thanks

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

Re: Buy to let property owned

Postby AGoodman » Tue Apr 12, 2022 6:01 pm

If you are looking at it from a purely IHT/CGT perspective, it is a balancing act.

The following assumes that the value of the father's estate is substantial - if a widower it would potentially need to be substantially over £1m to make the following applicable as below that there may be no IHT.

From pure IHT, he should give it away to the son. He would lose the rental income and security of having the asset to cover his care costs (e.g. decent in-home care or nicer residential care)

However, he would have to pay CGT on the gift and the son would have to pay CGT on any further increase in value before he sells. He would lose the free CGT uplift to market value that comes on death.

If father died within 7 years, father would suffer both IHT and CGT so more tax than he would have paid had he held onto it.

Accordingly, from a tax perspective considering both IHT and CGT, father should probably only give it away if he believes he will live for seven years and (given he cannot be sure of this) the CGT on the gift is relatively small.

This all turns on the numbers so if father has an estate of over £1m (or £500,000 if not a widower) he should take some proper advice.

The other option if the gain is small is to sell the property and invest in a portfolio of AIM shares. It's higher risk and potentially illiquid but after two years (under current rules) the shares qualify for 100% relief from IHT.


Return to “Property Taxation”