In the small print of the legally binding contract it'll have a clause about letting.
If your buying a house purely to rent out and don't disclose this to the lender then you will be committing fraud.
mortgages ?
- Thread starter David _b
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In the small print of the legally binding contract it'll have a clause about letting.
If your buying a house purely to rent out and don't disclose this to the lender then you will be committing fraud.
Ok gents
going to wake this thread up as things have changed a bit
House is worth 60k, dad has decided he doesnt want that in his hand and can actually live with a decent amount up front, which i can do, then the rest in monthly payments, interest free.
Is there any legal issues with this ? Plan is give him 15k or so, then standing order the remainder off at say £400 a month. House will be paid in under 10 years.
All will be properly contracted up, with all sorts of details in it like if he croaks, or i croak, or i cant make payment, etc
going to wake this thread up as things have changed a bit
House is worth 60k, dad has decided he doesnt want that in his hand and can actually live with a decent amount up front, which i can do, then the rest in monthly payments, interest free.
Is there any legal issues with this ? Plan is give him 15k or so, then standing order the remainder off at say £400 a month. House will be paid in under 10 years.
All will be properly contracted up, with all sorts of details in it like if he croaks, or i croak, or i cant make payment, etc
Have you looked into any tax implications? Shouldn't be a problem if you have a contract written up showing repayments, but I was under the impression you can only gift somebody £x per year tax free. Not totally sure how it will work but I'd just cover all bases.
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to the OP
Your dad can gift you the house. Its perfectly legal, and if your Dad lives past 7 years he does not pay inheritance tax on that gift. He will however pay CGT, as its not a principal residence, thus deemed to have been sold. There is no avoiding that. Paying the house off in small payments is not relevant as your name goes on the land registery so its an outright sale.
as regards Buy to Let. Yes that is the correct way to go about it but you can just buy the house from your dad you can have that as your primary residence. If you choose to let it out thats your business. Technically you're not supposed to and mortgage companies don;t come around knocking on the door to see who lives there. But given half of Britrian are at this they have gotten wise to that. So you must ensure you are on the electrol register for the house, have your bills registered there and make sure that renants aren't. Its not 'illegal' as you say. Its not criminal law, but one could argue that its intentional fraud. But if it was that strict half of landowners would be in trouble . The worse case scenarios is that they up your rate.
Your real problem is that if you have rental income and don't declare it. You could get away with if for 20years but once HMRC get you, its curtains.
Regarding gf living there, well ... many many men have been burnt by that. Thats why there are so many bitter men in the 30's and 40's haha. Itmight be prudent to have your name only as registred owner and only your name on bills, council tax. In the event of couples breaking up, courts look at the intention of why they got together, i.e. did she believe you were planning a life together etc. But no man wins in thse situations.
Your dad can gift you the house. Its perfectly legal, and if your Dad lives past 7 years he does not pay inheritance tax on that gift. He will however pay CGT, as its not a principal residence, thus deemed to have been sold. There is no avoiding that. Paying the house off in small payments is not relevant as your name goes on the land registery so its an outright sale.
as regards Buy to Let. Yes that is the correct way to go about it but you can just buy the house from your dad you can have that as your primary residence. If you choose to let it out thats your business. Technically you're not supposed to and mortgage companies don;t come around knocking on the door to see who lives there. But given half of Britrian are at this they have gotten wise to that. So you must ensure you are on the electrol register for the house, have your bills registered there and make sure that renants aren't. Its not 'illegal' as you say. Its not criminal law, but one could argue that its intentional fraud. But if it was that strict half of landowners would be in trouble . The worse case scenarios is that they up your rate.
Your real problem is that if you have rental income and don't declare it. You could get away with if for 20years but once HMRC get you, its curtains.
Regarding gf living there, well ... many many men have been burnt by that. Thats why there are so many bitter men in the 30's and 40's haha. Itmight be prudent to have your name only as registred owner and only your name on bills, council tax. In the event of couples breaking up, courts look at the intention of why they got together, i.e. did she believe you were planning a life together etc. But no man wins in thse situations.
In terms of HMRC, he's not gifting it to you if you are then going to be paying him back for it
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as ci_newman says whether he sales it to you, gifts it to you, he pays CGT (not you). CGT is on disposable of an asset by sale, gift, transfer of ownership, swapping it for something else etc There are some exemptions like sale of 1st home, transfer of assets to wife, personal car, gifts to charities etc
The point is which ever way you do it, your Dad still pays CGT. So gifting or selling will not make any different to his tax bill.
(someone correct me if I am wrong!)
I think the new allowance is 11k and anything afterwards is at 18% or 28% depening of you Dads income .
Edit
to add, the point of taxing gifts is to stop people taking advantage and getting under the table cash or favours
The point is which ever way you do it, your Dad still pays CGT. So gifting or selling will not make any different to his tax bill.
(someone correct me if I am wrong!)
I think the new allowance is 11k and anything afterwards is at 18% or 28% depening of you Dads income .
Edit
to add, the point of taxing gifts is to stop people taking advantage and getting under the table cash or favours
CGT is, of course, also affectionately known as an honesty tax. Just saying, not recommending... Anyway, the allowance is on the gain, not the value. £11,000 is indeed the 2014/15 allowance, and 18/28% rates are calculated on the income tax bands of person disposing of the property, i.e. if the Dad is already a higher rate tax payer he will pay any CGT due at 28%.
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The sale proceeds will be deemed to be market value by HMRC.
So if he transfers the house into my name is part of that process involving the tax man or at what point is he notified. And how does he get the value ?
And you say the tax is on the gain not the value. As in if I pick it up correctly your taxed on the difference in money the house was purchased for and what your now value is ?
And you say the tax is on the gain not the value. As in if I pick it up correctly your taxed on the difference in money the house was purchased for and what your now value is ?
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Well maybe I'm not going to... Cough
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basically yes, unless the house was owned before 31 March 1982 then you use the value of the house as at that point in time.
If you parents are giving you the house, then you want to do it sooner rather than later as house, if you think house prices will rise. Are you in NI, then might be a good time to get going as house prices have flattened haven't they
See here
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The idea of CGT on gifts is to have stop people gifting assets rather than selling them to avoid a tax bill. Otherwise the system is open to abuse
Bit confused now lads having read
https://www.gov.uk/capital-gains-tax/capital-gains-tax-on-property
It's my dad's main and currently only residence. He will be moving to another home. So by reading the above he will have nothing to pay the tax man
The house won't be a gift to me. I am buying it. On his terms.
https://www.gov.uk/capital-gains-tax/capital-gains-tax-on-property
It's my dad's main and currently only residence. He will be moving to another home. So by reading the above he will have nothing to pay the tax man
The house won't be a gift to me. I am buying it. On his terms.
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A £60k house for £45k? And you have £20k sitting in the bank? See if you can get a straight loan for £25k and give it to your dad? House bought. Loan paid off in 5 years or so. House paid off in full. Mortgage free.
Or, keep it for a year, then re-mortgage it, & pay off the loan then.
Or, keep it for a year, then re-mortgage it, & pay off the loan then.
Read my more recent posts buddy
Yep, that's what you get for only reading the first page, lol.
What I would do, id get a friendly assessor to value the house. Explain the situation, and try to aim for a low valuation just in case. You obviously don't NEED this for anything other than possible future investigation by HMRC . But if you have it, then you have proof of value for HMRC at the time of sale, and wont be relying on one of their monkies showing up and over-valuing the property.
With respect to the missus moving in. Be wary of common law. 2 years or something may entitle her to something. Not just the house, but your increased wealth over the period of time she is with you. Here is where a low valuation on the property may work against you.
Maybe get a "friendly" assessor to value your property twice.
There is no automatic notification. Hence CGT is frequently referred to as an honesty tax.