Common Q & A's - Property Accounts & Tax

Buying your children property

Q: My wife and I are retired and we would like to give our son and daughter some of their inheritance now. We’ve thought about buying them a house in joint names, which they could rent out (because they’ve already moved out and live with their families). What would the tax implications be?

A: Firstly, they wouldn’t qualify for Stamp Duty Land Tax Relief for First-Time Buyers, because firstly, they aren’t intending to live in the property and secondly, it sounds like they already own other property.

If you gift the cash to your son and daughter, there shouldn’t be any Capital Gains Tax to pay on the purchase because cash gifts are exempt from Capital Gains Tax. However, there would be Capital Gains Tax implications should they decide to sell it.

Your son and daughter would need to declare their share of the rental income and expenses on a self assessment tax return each year and pay any tax due.

And finally, if you both survive for another seven years then the gift will be ignored for Inheritance Tax purposes. If you don’t, then the cash gift will effectively be included as part of your estate at the time of death, and could be subject to Inheritance Tax depending on the size of your estate.


Selling your home at a loss

Q: My house has been on the market for four months now, so I have decided to drop the asking price. However, this now means that I’m selling it as a loss. Is there any way I can utilise this loss?

A: If you were to sell your house at a profit, it is unlikely there would have been any tax to pay because of Private Residence Relief (PRR). To qualify for the relief, the property must have been your only home and you should’ve used it as a home and nothing else.

The amount of PRR may have been restricted if you have a very large garden, you’ve let part of your entire home or you’ve used part of the property for business purposes.

If you would’ve qualified for PRR (had you made a gain), then I’m afraid you cannot obtain any relief if a loss was generated instead. If your PRR would’ve been restricted, then you may be able to claim loss relief for the part of the gain that didn’t qualify for PRR. But please note, these losses can only be used against other capital gains; not income.