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Where Taxpayers and Advisers Meet

Can i gift my property and live in btl

lunar
Posts:14
Joined:Sat Jun 13, 2015 1:19 pm
Can i gift my property and live in btl

Postby lunar » Sat Sep 14, 2019 4:26 pm

I would like to know if I can gift my residential property (A) to my two children as equal shares, then live for 7 years and move into the btl property (B) my wife and I own. Therefore, the btl property becomes my residential home.
This is to avoid inheritance tax on property A.
Also, property A is worth about £1m, purchased for £250k and property B valued at £600, purchased at £225k.

Jholm
Posts:117
Joined:Mon Mar 11, 2019 4:22 pm

Re: Can i gift my property and live in btl

Postby Jholm » Sat Sep 14, 2019 8:51 pm

Yes, surviving 7 years with remove liability to IHT. You need to consider capital gains tax upon the transfer. However, if you lived at the property throughout the time it was owned, then the disposal would be covered by PPR relief.

Also consider the future disposal of the buy to let. Almost certainly, CGT would be payable on the basis that you could not claim full PPR relief since you only lived there from a certain point.

strawn
Posts:54
Joined:Fri Jun 01, 2012 10:11 am

Re: Can i gift my property and live in btl

Postby strawn » Sat Sep 14, 2019 10:17 pm

then live for 7 years and move into the btl property (B) my wife and I own.
Do you mean you plan to live in your Principal Private Residence for the seven years? If so the plan won't work - see Gift With Reservation of Benefit.


The Residential Nil Rate Band applies to property you leave but not to property you gift while alive. Or so I understand.
Is there a case for gifting the BTL and keeping the Principal Private Residence?

On the other hand the CGT liability on the previously let house would vanish on death if you still lived there.

Be sure to buy life insurance in case you die within the seven years.

strawn
Posts:54
Joined:Fri Jun 01, 2012 10:11 am

Re: Can i gift my property and live in btl

Postby strawn » Sat Sep 14, 2019 10:23 pm

then live for 7 years and move into the btl property (B) my wife and I own.
Do you mean you plan to live in your Principal Private Residence for the seven years? If so the plan won't work - see Gift With Reservation of Benefit.

Note that the CGT liability on the previously let house would vanish on death if you still lived there. And the IHT liability would benefit from
the Residential Nil Rate Band.

Why tie the children into a house they need to own together? Why not just sell the house and gift each of them an equal share of the capital?

Be sure to buy life insurance in case you die within the seven years.

lunar
Posts:14
Joined:Sat Jun 13, 2015 1:19 pm

Re: Can i gift my property and live in btl

Postby lunar » Sat Sep 14, 2019 11:14 pm

The children are still young, 17 and 19 years.
I was thinking that I would permanently reside in the btl and the children can eventually sell property A and purchase their own or otherwise.
Can I assume that when gifting a property then I need to pay rent to live in the house that is gifted. Does this apply straight away or after 7 years have elapsed?

strawn
Posts:54
Joined:Fri Jun 01, 2012 10:11 am

Re: Can i gift my property and live in btl

Postby strawn » Sun Sep 15, 2019 12:51 am

Commercial rent paid straight away.

Then when the children sell the house there will be CGT to pay for the period they've owned it since it won't (presumably?) be their PPR.

And the two children will have to agree when to sell it: an invitation to fall out with each other.

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: Can i gift my property and live in btl

Postby AdamS93 » Sun Sep 15, 2019 9:03 am

Gifting your property to your children will remove any first time buyer reliefs they would get when they want to join the property ladder as well (SDLT etc).

The rent paid to the children will be taxable income for them.

Property has historically been a good investment, but it certainly isn't a tax efficient investment!

It is certainly not a decision to be made without professional advice.

lunar
Posts:14
Joined:Sat Jun 13, 2015 1:19 pm

Re: Can i gift my property and live in btl

Postby lunar » Sun Sep 15, 2019 3:51 pm

The other option for me is to eventually seel my residential property and reside in the btl. Then if any of the children wants to buy a property I can 'help' towards getting them on the property ladder.


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