Can I gift my holiday home or rental property to my children - Collyer Bristow (2024)

Table of Contents
Key information Transferring ownership of property from parent to child in the UK Shorter ReadsCan I make cash gifts under a power of attorney arrangement? Longer ReadsThe Middle Classes and the Autumn Budget Statement: Fallback, Fail-Safe, Cash-Cow, Taxpayers Longer ReadsTax Justice UK proposes wealth tax to raise £37 billion Shorter ReadsSpring Budget Statement 2022 Shorter ReadsGifts to Disabled and Vulnerable People Shorter ReadsWhat gifting options do non-domiciliaries have? Shorter ReadsGifts with international elements Shorter ReadsWhat are the tax implications of being the Bank of Mum and Dad? Shorter ReadsUS tax changes could be imminent Shorter ReadsThe Giving Pledge Shorter ReadsCan I give my home to my children (and still live in it)? Shorter ReadsHow to efficiently gift business assets Shorter ReadsUS/UK giving Shorter ReadsGifting in the Arts (CGS v AIL) Shorter ReadsHow can I help my children buy a house? Shorter ReadsHow should I approach charitable giving? Shorter ReadsHMRC estate administration investigations Shorter ReadsDomicile Enquiries – Tax Tribunal has jurisdiction to determine domicile in closure notice applications: Henkes v HMRC Shorter ReadsCovid-19, Travel Restrictions, and Tax Residence of Companies: OECD Guidance Released Shorter ReadsRetrospective Anti-Forestalling and the 2020 Budget Entrepreneurs Relief Changes: What Price the Rule of Law? Shorter ReadsPrime Minister’s remarks increase Entrepreneurs Relief concerns Shorter ReadsPre-Budget CGT Planning: Time to Act for Entrepreneurs and Business Owners Shorter ReadsGeneral Election: party manifestos confirm coming CGT Entrepreneurs Relief changes Shorter ReadsCalls to Abolish CGT Entrepreneurs Relief – Should Business Owners Be Worried? Shorter ReadsAre non-doms really leaving the UK? Shorter ReadsShould inheritance tax be simplified? Shorter Reads£15bn lost behind the sofa Shorter ReadsJohnson proposes £3,000 tax cut for higher earners Shorter ReadsBeing born a royal is hard enough – try being a US taxpayer too Shorter ReadsOne in a million? No, you’re only one in five. Shorter ReadsWhenever, Wherever… no Shakira, you need to keep track. Shorter ReadsGovernment to push ahead with 3,770% increase in probate fees for the wealthiest estates Shorter ReadsWhy the IHT nil rate band may be scant comfort for homeowners in the South East Shorter ReadsPension transfers may result in Inheritance Tax Charge Shorter ReadsCareful estate planning can save you a princely sum Shorter ReadsEstate planning need not be taxing Shorter ReadsSister (P)act 2: Back in the Co(habit)ation Shorter ReadsHMRC home in on Airbnb tax affairs Shorter ReadsBit-coining it in: HMRC waiting for cryptocurrency windfall? Shorter ReadsFranklin my dear, I don’t give an (estate) plan Shorter ReadsBetter to be pregnant this year rather than next? Shorter ReadsExecutors may not realise they have an Income Tax liability Shorter ReadsWide ranging tax reforms suggested by the Lib Dems Shorter ReadsHMRC error may mean over-payment of tax by non-resident trustees Shorter ReadsKeep Britain Tidy Shorter ReadsCrying wolf Shorter ReadsHugh Hefner to be buried next to Marilyn Monroe Shorter ReadsCan I make cash gifts under a power of attorney arrangement? Longer ReadsThe Middle Classes and the Autumn Budget Statement: Fallback, Fail-Safe, Cash-Cow, Taxpayers Longer ReadsTax Justice UK proposes wealth tax to raise £37 billion Shorter ReadsSpring Budget Statement 2022 Shorter ReadsGifts to Disabled and Vulnerable People Shorter ReadsWhat gifting options do non-domiciliaries have? Shorter ReadsGifts with international elements Shorter ReadsWhat are the tax implications of being the Bank of Mum and Dad? Shorter ReadsUS tax changes could be imminent Shorter ReadsThe Giving Pledge Shorter ReadsCan I give my home to my children (and still live in it)? Shorter ReadsHow to efficiently gift business assets Shorter ReadsUS/UK giving Shorter ReadsGifting in the Arts (CGS v AIL) Shorter ReadsHow can I help my children buy a house? Shorter ReadsHow should I approach charitable giving? Shorter ReadsHMRC estate administration investigations Shorter ReadsDomicile Enquiries – Tax Tribunal has jurisdiction to determine domicile in closure notice applications: Henkes... Shorter ReadsCovid-19, Travel Restrictions, and Tax Residence of Companies: OECD Guidance Released Shorter ReadsRetrospective Anti-Forestalling and the 2020 Budget Entrepreneurs Relief Changes: What Price the Rule of Law? Shorter ReadsPrime Minister’s remarks increase Entrepreneurs Relief concerns Shorter ReadsPre-Budget CGT Planning: Time to Act for Entrepreneurs and Business Owners Shorter ReadsGeneral Election: party manifestos confirm coming CGT Entrepreneurs Relief changes Shorter ReadsCalls to Abolish CGT Entrepreneurs Relief – Should Business Owners Be Worried? Shorter ReadsAre non-doms really leaving the UK? Shorter ReadsShould inheritance tax be simplified? Shorter Reads£15bn lost behind the sofa Shorter ReadsJohnson proposes £3,000 tax cut for higher earners Shorter ReadsBeing born a royal is hard enough – try being a US taxpayer too Shorter ReadsOne in a million? No, you’re only one in five. Shorter ReadsWhenever, Wherever… no Shakira, you need to keep track. Shorter ReadsGovernment to push ahead with 3,770% increase in probate fees for the wealthiest estates Shorter ReadsWhy the IHT nil rate band may be scant comfort for homeowners in the... Shorter ReadsPension transfers may result in Inheritance Tax Charge Shorter ReadsCareful estate planning can save you a princely sum Shorter ReadsEstate planning need not be taxing Shorter ReadsSister (P)act 2: Back in the Co(habit)ation Shorter ReadsHMRC home in on Airbnb tax affairs Shorter ReadsBit-coining it in: HMRC waiting for cryptocurrency windfall? Shorter ReadsFranklin my dear, I don’t give an (estate) plan Shorter ReadsBetter to be pregnant this year rather than next? Shorter ReadsExecutors may not realise they have an Income Tax liability Shorter ReadsWide ranging tax reforms suggested by the Lib Dems Shorter ReadsHMRC error may mean over-payment of tax by non-resident trustees Shorter ReadsKeep Britain Tidy Shorter ReadsCrying wolf Shorter ReadsHugh Hefner to be buried next to Marilyn Monroe Associated sectors / services Transferring ownership of property from parent to child in the UK Associated sectors / services Message us on WhatsApp (calling not available)

Can I gift my holiday home or rental property to my children - Collyer Bristow (1)

Can I gift my holiday home or rental property to my children - Collyer Bristow (2)

Shorter Reads

Gifting a second home or a rental property to your children can be a great way to pass an asset down a generation in a tax efficient way. However, there are number of points that you will need to be aware of before transferring a property to them.

2 minute read

Published 24 January 2022

Key information

  • Services
  • Tax & Estate Planning

Transferring ownership of property from parent to child in the UK

The principal tax to consider when making gifts is inheritance tax (IHT). The gift of a property will be a ‘potentially exempt transfer’. If you survive the gift for seven years, you will escape paying IHT on it, but if you were to die within the seven years, the gift will be taxable at 40% (with the potential tax liability tapering down after three years).

If you give away property to your children but continue to derive some benefit or enjoyment from it, then this may be deemed a “gift with reservation of benefit” (GROB). The result of this is that the whole of the property will be treated as remaining within your estate for IHT purposes and taxed at 40% on your death notwithstanding the fact that you no longer own it.

A GROB can be avoided if the donor (i.e. the parent) pays market rent to the donee (i.e. the child or children) for their occupation and enjoyment of the gifted property. However, this may be unattractive from a cash flow perspective.

However, there is a potential way through the minefield which makes use of specific exceptions to the GROB rules. The first is that you could pay a market rent to your children for your occupation and enjoyment of the gifted property. However, this may be unattractive from a cash flow perspective. Alternatively, there are exceptions that apply to gifts of a share in land where you either: (i) do not occupy the land, or (ii) occupy the land along with your children and do not receive any benefit which is provided by or at their expense.

Practically speaking, there are several ways to take advantage of these exceptions. In the case of a rental property, you will likely not occupy it and so you can give away a share, say 75%, to your children but could continue to receive some or all of the rent without being subject to the GROB rules for as long as the property continues to be commercially let. As a general rule, rent will be due to you and your children in proportion to your respective ownership of the property. However, if you depend on the rental income, you could separately agree with your children as co-owners that you will continue to receive all the rent without affecting the IHT position.

For a holiday home which is occupied to some extent by the whole family, there is no GROB as long as you do not receive any benefit from the property at your children’s expense. This means that you should share any outgoings (e.g. bills, mortgage payments, council tax etc.) at least pro-rata to ensure that your children do not pay more than their fair share, as this would constitute a benefit to you. Alternatively, if you are feeling especially generous, you could choose to continue paying all the expenses.

While this planning may be effective in reducing your estate for IHT purposes, any gift will be subject to CGT at up to 28%. This is a lower rate of tax, currently, than IHT on death but is payable immediately. There may also be stamp duty to pay on the gift if the property is mortgaged.

Ultimately, any decision on gifting your holiday home or rental property will involve carefully weighing up the potential tax charges as well as considering your future intentions as regards to the property. We would always suggest you take legal advice on your specific circ*mstances before making any large gifts.

Read our latest article in the Lifetime Giving series: What gifting options do non-domiciliaries have?

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Shorter Reads

Gifting a second home or a rental property to your children can be a great way to pass an asset down a generation in a tax efficient way. However, there are number of points that you will need to be aware of before transferring a property to them.

Published 24 January 2022

Associated sectors / services

  • Tax & Estate Planning

Transferring ownership of property from parent to child in the UK

The principal tax to consider when making gifts is inheritance tax (IHT). The gift of a property will be a ‘potentially exempt transfer’. If you survive the gift for seven years, you will escape paying IHT on it, but if you were to die within the seven years, the gift will be taxable at 40% (with the potential tax liability tapering down after three years).

If you give away property to your children but continue to derive some benefit or enjoyment from it, then this may be deemed a “gift with reservation of benefit” (GROB). The result of this is that the whole of the property will be treated as remaining within your estate for IHT purposes and taxed at 40% on your death notwithstanding the fact that you no longer own it.

A GROB can be avoided if the donor (i.e. the parent) pays market rent to the donee (i.e. the child or children) for their occupation and enjoyment of the gifted property. However, this may be unattractive from a cash flow perspective.

However, there is a potential way through the minefield which makes use of specific exceptions to the GROB rules. The first is that you could pay a market rent to your children for your occupation and enjoyment of the gifted property. However, this may be unattractive from a cash flow perspective. Alternatively, there are exceptions that apply to gifts of a share in land where you either: (i) do not occupy the land, or (ii) occupy the land along with your children and do not receive any benefit which is provided by or at their expense.

Practically speaking, there are several ways to take advantage of these exceptions. In the case of a rental property, you will likely not occupy it and so you can give away a share, say 75%, to your children but could continue to receive some or all of the rent without being subject to the GROB rules for as long as the property continues to be commercially let. As a general rule, rent will be due to you and your children in proportion to your respective ownership of the property. However, if you depend on the rental income, you could separately agree with your children as co-owners that you will continue to receive all the rent without affecting the IHT position.

For a holiday home which is occupied to some extent by the whole family, there is no GROB as long as you do not receive any benefit from the property at your children’s expense. This means that you should share any outgoings (e.g. bills, mortgage payments, council tax etc.) at least pro-rata to ensure that your children do not pay more than their fair share, as this would constitute a benefit to you. Alternatively, if you are feeling especially generous, you could choose to continue paying all the expenses.

While this planning may be effective in reducing your estate for IHT purposes, any gift will be subject to CGT at up to 28%. This is a lower rate of tax, currently, than IHT on death but is payable immediately. There may also be stamp duty to pay on the gift if the property is mortgaged.

Ultimately, any decision on gifting your holiday home or rental property will involve carefully weighing up the potential tax charges as well as considering your future intentions as regards to the property. We would always suggest you take legal advice on your specific circ*mstances before making any large gifts.

Read our latest article in the Lifetime Giving series: What gifting options do non-domiciliaries have?

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