Suggestions
• Gift the property and then pay full market rent to live there. The gift will be a potentially exempt transfer (PET) for IHT purposes; income tax on the rent will be paid by the donee.
• Mortgage the house, giving away the proceeds or invest the money in assets that potentially do not attract IHT, for example AIM shares. After two years, the investments will qualify for 100% relief from IHT and the mortgage will reduce the value of the house for IHT purposes. However, mortgage interest will be charged. The funds borrowed could be gifted as a PET.
• Move to a rented property and give the main residence away. The gift will be a PET. If the gift is made within three years of the date of moving no CGT will be charged if the property has been the individual’s only or main residence throughout the period of ownership.
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