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Where Taxpayers and Advisers Meet

New Buy To Let property

Posts: 1
Joined: Wed Jul 03, 2019 1:45 pm

New Buy To Let property

Postby howitworks » Wed Jul 03, 2019 2:06 pm

A friend of mine and his wife are looking to buy a Buy To Let flat (no mortgage). They are both nearly 70 years old. They may also move into this flat in the future if they can no longer look after the house that the currently live in (as they get older). My friend and his wife wish to use the income from this property to supplement their pension.

They have 2 children who both already own their own homes. Both these children have jobs and are either basic or higher rate tax payers.

Are there any tax benefits or downsides to owning the new Buy To Let flat as either tentants in common (25% each) or joint tenats with their 2 children?

In particular:

+ Would either of the children incur any kind of tax liability when they buy this new Buy To Let flat and adds his childrens names as either joint tenants or tenants in common? He would be paying for all of the stamp duty himself.
+ Assuming that their estate is worth more than the inheritance tax threshold, if the property was held as tenants in common at the time of purchase and then my friend dies then how much of the Buy To Let flat would be deemed as being taxable from an inheritance tax standpoint?
+ Does holding the property as joint tenats change things in the above scenario?

Generally, he is wanting to know if there is anything in particular that he should do when buying this Buy To Let flat which could be beneficial in the future.


Posts: 857
Joined: Fri May 16, 2014 3:47 pm

Re: New Buy To Let property

Postby AGoodman » Mon Jul 08, 2019 2:42 pm

It's more question of why you would do that:

1. If these people receive more than half the income or live in the property (at any time), they would have a reservation of benefit and so the whole property would potentially be subject to IHT unless the last reservation of benefit took place 7 years prior to death;
2. There would be no CGT uplift to market value on the property at death so the children would have to pay CGT on any gain when they sold;
3. A combination of 1 & 2 could mean that you end up paying IHT and CGT on the same value;
4. Property value exposed to divorce risk.

There could also be an income tax issue with the children being liable to income tax at their marginal rates on their share of the income, even if they agree to let the parents have it.

Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”