Q I’m 64 years previous and a house owner, however I additionally personal a second property price round £180,000, which I purchased with an inheritance. I hire this home for a modest sum to my daughter. She is a mature scholar who’s ending college this yr and hopefully will quickly transfer into full-time employment.
I pay no tax at current, however once I attain 65 in six months’ time I’ll obtain my state pension, which, taken along with the rental earnings, will push me over the private tax allowance.
Would it not be potential to offer my daughter the cash to purchase this home from me with an interest-free mortgage over, say, 30 years? My associate and I’ll have sufficient to stay on with out the rental earnings as soon as we obtain our state pensions. I perceive I must pay capital features tax initially however, as I’ve lent the cash interest-free, I can be making no additional revenue. As I’m not making a revenue I assume there can be no tax return to file and no tax to pay on the mortgage to my daughter. I’d, in fact, arrange the interest-free mortgage by way of a solicitor. CG
A I anticipate I’m lacking one thing, however for those who gained’t want the rental earnings when you begin getting your state pension, why don’t you let your daughter and grand-daughter stay in your second property for nothing? It’s potential to lend your daughter cash to purchase the property from you – and you’d be sensible to get a solicitor to attract up a compensation settlement – however why complicate issues?
Slightly than lend your daughter the cash to purchase the property, it could be easier simply to offer it to her. There can be a capital features tax invoice – as there can be for those who offered it to her – however you’d be capable of use the money you’d in any other case have lent to her to prime up your earnings, with no earnings tax implications. Giving her the property would even have the potential to scale back a future inheritance tax (IHT) invoice. Offered you reside for seven years after making the reward, the property would not rely as a part of your property in your dying and so wouldn’t be answerable for IHT.