- Written by
- Elliot Lewis, Partner
Parents often ask whether it is possible to put their property into the names of their children for tax planning reasons. This can be difficult for tax purposes if the property is the client’s main home. There are however wider opportunities for gifting second properties (or “investment properties”) to children.
To obtain any Inheritance Tax benefit from making a gift, you must intend for the recipient of the gift to take the benefit of that gift. If you simply add your child’s name to the deeds of an investment property, but give them no additional benefit, such as rental income, HMRC may treat the property as still belonging to you for the purpose of calculating Inheritance Tax on your estate.
If you want to gift an investment property there can be Capital Gains Tax (“CGT”) to pay depending on the increase in value since purchase. For that reason, most clients should not give the whole of the property to their children at once
This can be resolved by making annual gifts of a share of the property to your children, provided the gifts are within your available CGT allowance – in this way you are giving a slice of the property (the cake) and keeping the remainder. Once you have survived for 7 years from the date you make the gift, the value of that transfer passes outside your estate for Inheritance Tax purposes. Each transfer is its own separate gift with its own 7 year timetable.
At Thackray Williams, we have an experienced team specialising in advising on these types of transfers. If you would like more information about this issue, please call our Private Client Team and we will be pleased to arrange a meeting.
Advice | 20 April 2021
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