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bigduckontax
bigduckontax, Accountant
Category: Tax
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Does CGT arise if I add my adult son to my BTL property while

Customer Question

Does CGT arise if I add my adult son to my BTL property while retaining the property in my sole name so he can assume my mortgage after my death. He is named in my will to inherit this property and will pay inheritance tax if any due over the threshold
I have extended my present mortgage to end until I am 90yrs the maximum allowed by my lender. I do not wish to have to sell it but by my son being on the mortgage he can carry on beyond my surviving 90 yrs.
I am not selling transferring or gifting the property. This is only to safeguard from compulsory sale at the end of the term of my mortgage
Advise appreciated
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

If you retain the property in your sole name there is no disposal and no CGT arises.

Were you to add your son to the title there would be a disposal, albeit of 50% of the value, and there would be CGT on the gain and, as you never lived in the property, the sole relief available would be 11K Annual Exempt Amount and the tax rate would be 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. Furthermore it would be a gift and create a Potentially Exempt Transfer (PET) in your Inheritance Tax (IHT) position. PETs run off over a 7 year period at a taper and in the event of your decease within that time frame would be added back to your estate for IHT purposes. If your estate were insufficient to meet the PET then the liability would cascade down to the beneficiary for immediate payment. IHT kicks in at 325K and is levied at 40% flat rate on the surplus.

So after that rather verbose statement we come to the nub of your question. You could not add your son to the title of the BTL property without generating a CGT liability. You can do what you like about the mortgage, that is outside the scope of UK taxation in the scenario set out in your query.

I do hope I have been able to shed some light on your position. I have tried not to rain on your parade.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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