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Found 15 results

  1. Hey everyone, I have been told my very old grandmas property will be split between myself and my 2 sisters when she passes. Obviously a hard topic to look at but I want to be sensible about what options I have. My 2 sisters do not want to keep the property, as they want the lump sump of cash. I have a LTD company set up with my partner which we have yet to use for a property but intend to in the future for BTL. Is there a way to avoid inheritance tax? Can I buy the property into the company now? Does it have to wait until she has passed away? I’m keen to know the most cost effective way to manage this. Any help or advice on this would be appreciated! thanks fran
  2. Hi All As you can see below my question is quite specific and not related to section 24 but balancing paying the least tax vs future estate planning. x7 properties personal name - no mortgage. Net profits have reached the basic tax threshold of 50k so will not be buying any further properties on my personal name. Income Tax 20% x1 property via LTD company SPV and all future purchases to be done via LTD company. Corporation tax 19% My question is (we will assume i meet the conditions for incorporation relief) would you keep things as they are and continue to buy any future properties via my LTD company vs Incorporate my portfolio x7 (pay legal and solicitor costs), start to pay 7.5% dividend tax (in addition to 19% corporation tx) and better place myself for future IHT planning (Growth/Freezer shares, Family investment company etc) and continue to buy any future properties via my LTD company Thanks
  3. I have been gifted a monthly amount of money from my dad for the last few years and it qualifies under 'normal expenditure out of income' (section 21 of the Inheritance Tax Act 1984). I was just wondering if I am able to boost my salary by adding this monthly gift to it? and in turn apply for a larger mortgage? for example; I have been gifted £500 per month, for the last 7 years from my dad ('normal expenditure out of income'). Can I add this to my main salary of £2500, to boost my salary to £3000 and receive a larger mortgage? Cheers
  4. Hi everyone, I am hoping for some feedback/guidance/advice on a strategy to pass a portfolio of mortgaged properties to my daughter in the future, who is currently two years old. The idea is to build up a portfolio of properties that my wife and I will use to fund our retirement (15-20 years away sadly), but of course would want these to be passed to my daughter with the minimum amount of tax payable. The plan is to set up a Ltd company and have multiple share classes, A class - management/voting, B class - asset ownership only, C class - rights to revenue/dividends. I've read that i can slowly gift the B class shares to my daughter, and assuming (and hoping) i live seven years after that, avoid any inheritance tax but also use "holdover relief" to avoid any capital gains, as i understand the gain is then passed to my daughter and is only payable if she sells the properties. So would it be best to start gifting shares to my daughter sooner rather than later, before the company has any real value (can a minor own shares in a limited company?) and generally speaking, does this sound like a viable strategy? Any guidance and direction on anything i have likely missed would be great! Thanks
  5. Hi everyone, I hope you are all safe with the covid 19 situation and all. Im in a position where my family will be selling a property and with a portion of this I will be using it to set up my own company and invest using this lump sum. To make this as simple as possible my mother will be selling a property for £300k. From that my mother will be buying a £200k house through a LTD company having £100k left over for retirement. Myself and my sister are looking at the best way to minimise the tax and be able to secure the £200k property for us in the future. Once the £200k property has been purchased we would refinance it and split that between myself and my sister (going off the fact the refinance sum would be £150k). I would use this money to invest and we would split the repayments in half. What I am looking to do is to purchase multiple properties through a limited company (thats not to do with my family) with that investment. If the original £200k property was bought via a company that myself, sister and mother set up, then refinanced, could I use that money (the £75k) to invest through my new company (my investment business) without having to pay taxes on it? Essentially moving £75k from one limited company into my own without tax implications (eg paying dividens as I would be reinvesting it and not spending it on myself (eg cars). So basically how can I access the funds from the refinanced property to use in my new business without paying tax on it. I appreciate this is a LOOOOONNNGGGGG question but I have scoured the internet and after reading many books thought I would try my luck here Any feedback is welcome Many Thanks David Tate
  6. Hi there, I own a property company in London with a mixture of residential & commercial property. I understand that Property companies are not exempt from inheritance tax for my kids. For 30 years I have owned the freehold and for a portion used the commercial sections of the properties for my own business. Now I'm looking to lease the commercial areas. We have 4 residential units and 2 commercial units. We also have a personal property which exceeds £1Million. I have a few questions that id be grateful for your help with. I'd like to continue to benefit from the income from the business without leaving the kids with a large IHT bill when I pass away. I believe, that my children will be exempt from the first £1M of inheritance tax I think by 2020. 1. Would my business be included in the IHT exemption or not? 2. Since the business hasn't always been used a property company, would it be treated as a property company or as a retail business as it has been for 75% of its tenure? As such, would a portion be deducted from the inheritance tax bill or is it treated all as a property company? 3. Are there any property investments that are exempt from IHT? 4. What business types are exempt from IHT? 5. I wondered if there another way to re-structure the business so my children may avoid being liable for IHT, perhaps joint ownership in the hope I survive 7 years? Hope the above makes sense and thanks in advance for your help' Rgds S
  7. Hi all, My siblings and I are the only beneficiaries in our father's will and are due to receive various assets including two properties, and a portion of another property. We are assessing our options with how to administer the estate, and have two options: 1. Receive all assets as per the will and be subject to IHT. 2. Step aside as beneficiaries and allow all assets to pass to our mother, meaning no IHT due as they were married. My mother would then gift the assets to us in full. Thinking specifically of the properties, I am hoping that as they are mortgage free there would be no stamp duty payable, and also no capital gains tax due as they will be signed over to us straight after she receives them and thus no capital gain - is this correct? Then thinking into the future, if we were to let out the properties for a few years then sell, am I right in thinking CGT would be due on the difference between their value at the time they were gifted to us and their sale price? Or would the entire sale value be subject to CGT as they were signed over to us for free? It seems that option 2 is the best option in any case, but if anyone could provide any guidance as to our position on stamp duty and CGT if we were to take that option, and let me know of anything I might be missing from the equation... I would be hugely appreciative. Thank you. TDH
  8. Hi, I’m hoping that someone can offer some advice on our current family situation. My Gran recently had an accident and broke her hip causing her to be hospitalised and eventually put into a care home. She was living in a bungalow by herself but that’s no longer sustainable. She has had to leave her bungalow and enter into a care home. She is now going to sell the bungalow to help fund the cost of the care home. The cost of the care home is about £32k per annum and after she sold her bungalow along with her other savings she will have around £280k. We propose to keep £60k of that in immediately accessible savings accounts to pay for the monthly cost of the care home. She has about 8-9 years worth of care home fees she can pay for out of her savings. She’s 94 but she’s in great shape apart from the hip, so we’re not sure whether she’ll pass away before her money runs out or if it’ll be the other way round. I’m a fairly new BTL investor myself (I only have one BTL property so far) but I’ve suggested instead of leaving it in savings account with poor interest rates, that the majority of my Gran’s money should be invested into buy to let property to try to cover the monthly care home fees with the monthly rental income as well as having a long-term growth plan and for this to be passed down to my Mum when my Gran does eventually pass away. My rough calculations are given a 75% LTV we’d be able to get 10 rentals hopefully yielding around £250-£350 pcm each. The cost of the care home is approximately £3k per month so the rental income should cover the majority of the fees. We are based in Bolton near Manchester so terrace houses are still reasonable value and the yield is pretty good. My mum agrees that property is the way forward but were unsure of the mechanism to achieve this. I have my own buy to let company but I am the sole director so it doesn’t quite feel right that the £220k makes its way into that company given there is my brother and mother to think about. We're not experts in inheritance tax and would love to hear some suggestions about the most efficient way to invest my Gran’s money so I can give her peace of mind to be a long-term rental income coming in that will sustain a monthly payment for the care home. A few options of the top of my head: 1) Form a new limited company with my Gran, myself, my brother and my Mum as directors and Gran either invests or loans the money to the business. 2) Gran loans money to my Mum and she starts a BTL company, although she is retired but thinks that she can still get a BTL mortgage. 3) Use my ready to go BTL company but not sure the best way to get the investment funds into it? 4) Any other ideas? We’d welcome any ideas or recommendations of people to speak to for advice as we are unsure what’s the next best step would be. Cheers, Rick & Family.
  9. Hi all, Can anybody recommend a good accountant who has significant knowledge and preferably experience of property investing themselves in the Northampton/Milton Keynes area? I have found a couple of local ones through Google but would value a recommendation. Many thanks, Wes.
  10. Evening, My mother, my wife and I have been discussing ways to start a property company. We will each put in the same amount of money to start it. Our desire is to structure the company to reduce future exposure to Inheritance tax. Is it possible to set up a company where my mother would be a controlling director but only have a minimal, say 2% owning share of the company so that her value is reduced but her influence within the company is not. I'm sure Rob has talked about something similar in the past but I cannot find reference to it. I would like help if anybody has done something similar or ha a good solicitor or accountant who can assist with the setting up of a company and any reference to the ball park costs of setting up and running a company. Regards Matt
  11. Hi dear property investors and helpers, My first time posting here. My position: I have a buy to let property in London which is in shared ownership with my parents, due to the upcoming Landlord tax, I am looking to structure my current and future properties in a company. I am looking to expand my portfolio and looking to hold properties in a company. I have recently married and my partner is not a named owner in the property. I have heard that you can have a company control the BTL property so that it is effectively within a company whilst it pays for your mortgage. Has anyone heard or doing this that can advise me how to structure this? When buying my new property, I would like it to be under a company, has anyone bought their first property through a company? If so, please advise how you went about setting this up and the legalities involved in doing so. If I can do both of the above using one company, that would be perfect! Kind regards, Piyush
  12. Hi folks, thought I'd try posing a complex tax question to you clever lot after having read some incredibly in depth advice given on other threads. You may want to get a cup of tea first... Circumstances: Grandparent (A) has left 75% estate to only child (B) and 25% split to grandchildren (C + D). The IHT has been paid and probate granted leaving in the estate a mortgage-free London home that is currently let out. Ownership is still up in the air. Immediate Aims: B wants to keep the property for the income and pay off children C + D by raising a 25% LTV mortgage (75% equity). C + D want this too. For this to happen, B can fill out an Assent Form, get a mortgage, pay stamp duty (SDLT) on that 25% and transfer the mortgage monies to C+D. Problem: B doesn't relish paying The SDLT (about £9k) but it's not such a big issue and could possibly instead pay C + D out of own pocket and then be reimbursed from mortgage without 'buying out' other two beneficiaries C + D and so avoid the SDLT? (question 1). However, the biggest stumbling block is that major IHT will be due when B eventually dies, payable by C + D. Problematic Solutions: 1. B could do a deed of variation (Ed Miliband style) to A's will to move property to C + D now but would then forego the income (and the equity), so wouldn't achieve the main aim. 2. By holding on to the property until later in life B could then gift the property to C +D but would 1. forego income in last years, 2. probably get the 7 year timing wrong and 3. would also pay CGT for any uplift in property price between now and date of gift. Idea: A LTD company is set up now and the property is transferred into it instead of to B perhaps by a deed of variation to avoid SDLT on the whole worth of the property (question 2). My understanding is that because the LTD company would be an investment company i.e. holding an asset, it wouldn't be eligible for Business Property Relief (BPR) and therefore the IHT bites again (question 3). So then an employee benefit trust (EBT) is set up for C + D and e.g 90% of the LTD company's shares are transferred to it which makes those shares IHT free due to BPR while B retains the e.g. 10% share of the LTD company and maintains control and income. Any further info on EBT would be very welcome (question 4). Downsides: 1. one for Income Tax (IT). B is lower rate taxpayer and outside a company would pay 20% of rental profits but inside would pay 20% corporation tax (CT) then would have £5k free a year in dividends and then 7.5% dividends tax. As CT is set to go down to 17% by 2020 and the first £5k is tax free, overall tax would probably be around 22%, i.e. 2% more by having property in a company so not really a big deal. The upside is that should B wish, income tax could be left in the company for C + D to inherit. 2. C + D, whilst doing well out of the above strategy, still require their 25% (12.5% each) sooner rather than later so an LTD company BTL remortgage would need to be raised to pay them. Clearly there are, whilst growing, fewer lenders for ltd companies and higher rates. The low LTV of 25% however should help in this regard but clearly this needs to be factored in as well as looking at their criteria for lending. However, the mortgage monies, I presume, would be paid into the company rather than to C + D directly so how could this money get paid out without being subject to dividend taxes (question 5). Well, that is pretty much as clear as I can make it . I'm aware there's a big having your cake and eating it element to this and there are probably stumbling blocks but it's a problem many people seem to have so hopefully it will help others out there. Alistair
  13. Do you own assets that will eventually be passed on to your children? Are you worried about inheritance tax? The problem — capital gains tax (CGT) & inheritance tax (IHT) Many parents throughout the UK wish to transfer assets to their children now to avoid inheritance tax (IHT) in the future and we receive many calls from clients and non-clients who have heard about lifetime transfers. Basically, if you transfer assets up to the IHT threshold and survive for seven years after the transfer, then that transfer will not form part of the IHT liability upon your passing. Unfortunately, however, parents still have to pay capital gains tax (CGT) on any transfers made between them and their children, even if the transfer is a gift. HMRC deems that any gifts of assets are liable for CGT at market value. If an asset is valued at £100,000 and is given to a child for no consideration, then the £100,000 is what is used to determine the CGT liability. This causes people a huge headache as they know that their assets may be subject to IHT if they do not act quickly, but even if they do, their assets are subject to CGT. Can you relate to the above? A real life client example — John passing assets to his son James For the purpose of this article we are going to name my client John to protect his identity. John has £1.5m of assets, of which £1m is in residential properties and £500K is the net asset value of his trading business. He wishes to set up his son James (20) in business to give him a head start in life as university is not on the agenda for him. John thinks about transferring all of the residential properties and the business to his son so that he can leave the UK for a sunnier climate. John knows that making such transfers will help him mitigate IHT if he survives for seven years afterwards. At the time of writing the transfer limit was £325,000 and the IHT threshold upon death is also £325,000. This means that James would have to pay 40% tax on any excess over £750,000. Ultimately this would mean selling off some assets. Transfers to mitigate CGT and IHT As we have identified, there are £500,000 nets assets in his business. John can transfer the business to his son and claim gift relief, meaning that John does not pay CGT but his son will have a deemed cost of £0. This means that James will have to pay more CGT in the future — he will pay CGT not only on the increase in value of the business during the time he has owned it, but also the deferred amount due when it was gifted to him. An example of how gift relief works was included in this article. When it comes to the residential properties, John considers a transfer up to the lifetime transfer value of £325,000, half of the residential property value, but then realises he would have to pay CGT upon such a transfer. Remember, however, that John has an annual capital gains exemption of £11,100, which means that any gain below this amount would be CGT-free. John could therefore consider transferring one or two properties to his son per year to take advantage of this allowance. Practical steps you should now take to mitigate IHT and CGT It is one thing to understand the theory but it is another to put it into practice. This is why I have written a step-by-step guide to implementing this strategy: Identify the nets asset value of your trading business assets and transfer those using gift rollover relief Transfer assets over time that are not trading assets to utilise your capital gains exemption
  14. Do you own assets that will eventually be passed on to your children? Are you worried about inheritance tax? The problem — capital gains tax (CGT) & inheritance tax (IHT)Many parents throughout the UK wish to transfer assets to their children now to avoid inheritance tax (IHT) in the future and we receive many calls from clients and non-clients who have heard about lifetime transfers. Basically, if you transfer assets up to the IHT threshold and survive for seven years after the transfer, then that transfer will not form part of the IHT liability upon your passing. Unfortunately, however, parents still have to pay capital gains tax (CGT) on any transfers made between them and their children, even if the transfer is a gift. HMRC deems that any gifts of assets are liable for CGT at market value. If an asset is valued at £100,000 and is given to a child for no consideration, then the £100,000 is what is used to determine the CGT liability. This causes people a huge headache as they know that their assets may be subject to IHT if they do not act quickly, but even if they do, their assets are subject to CGT. Can you relate to the above? A real life client example — John passing assets to his son JamesFor the purpose of this article we are going to name my client John to protect his identity. John has £1.5m of assets, of which £1m is in residential properties and £500K is the net asset value of his trading business. He wishes to set up his son James (20) in business to give him a head start in life as university is not on the agenda for him. John thinks about transferring all of the residential properties and the business to his son so that he can leave the UK for a sunnier climate. John knows that making such transfers will help him mitigate IHT if he survives for seven years afterwards. At the time of writing the transfer limit was £325,000 and the IHT threshold upon death is also £325,000. This means that James would have to pay 40% tax on any excess over £750,000. Ultimately this would mean selling off some assets. Transfers to mitigate CGT and IHTAs we have identified, there are £500,000 nets assets in his business. John can transfer the business to his son and claim gift relief, meaning that John does not pay CGT but his son will have a deemed cost of £0. This means that James will have to pay more CGT in the future — he will pay CGT not only on the increase in value of the business during the time he has owned it, but also the deferred amount due when it was gifted to him. An example of how gift relief works was included in this article. When it comes to the residential properties, John considers a transfer up to the lifetime transfer value of £325,000, half of the residential property value, but then realises he would have to pay CGT upon such a transfer. Remember, however, that John has an annual capital gains exemption of £11,100, which means that any gain below this amount would be CGT-free. John could therefore consider transferring one or two properties to his son per year to take advantage of this allowance. Practical steps you should now take to mitigate IHT and CGTIt is one thing to understand the theory but it is another to put it into practice. This is why I have written a step-by-step guide to implementing this strategy: Identify the nets asset value of your trading business assets and transfer those using gift rollover relief Transfer assets over time that are not trading assets to utilise your capital gains exemption
  15. Hi everyone, I'd be keen to hear your opinions on the following scenario and how best to achieve what we're aiming for (sorry if I waffle on!).. My situation: I have been investing in property for about 3 years and have a small portfolio of 5 single lets. I plan to refinance on these houses and buy more properties in the coming years, however as they're all in their initial mortgage terms at the moment, I won't be able to do this until 2015/16 (without facing high redemption fees!) which is where my Dad comes in.... My Dads situation: My Dad's house is mortgage free and worth around £200k. He has lived with his partner for the past 3 years and during this time he has rented his property out. My Dad is aged 69 and is retired. He is at a stage in his life where he is thinking about his assets and how best to pass them on to me now as opposed to when he passes away. What we want to achieve: In an ideal world, my Dad would like to give me his house now but continue to receive the rent that the property receives. I would then take out a mortgage on the property and be solely responsible for it (unless there are benefits to my Dad being on the mortgage??). I'd use the released equity (£80k ish) to purchase two properties either solely in my name or with my dad if there is a benefit to this. Issues: Our concerns mainly relate to how to gift the property to me cost effectively. I don't think inheritance tax will come into play as it is under the £325k threshold but will the fact my Dad will continue to receive the rental money from the property have implications? He is happy for me to take over as landlady and remove himself from it completely but I guess that then throws up the issue of how I give him £800 per month and how that looks in the eyes of the tax man? Another option is to add me to the deeds as a joint owner but as a beneficial joint tenancy, would I be right in thinking my Dad would need to be on any mortgage I take out on the property? If we were to do it as tenants in common with a 50/50 share, would I only be able to get a mortgage based on half of the houses value? Any advice would be much appreciated! I know we should probably speak to an advisor but I thought I'd try and get some opinions first. Thank you in advance! Hayley
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