Protecting the future
For most people, their properties are their most valuable asset. And for anyone with children, the consequence of not having made provision for estate planning may be devastating. Passing on rental property to loved ones, however, can be a complicated process filled with many potential pitfalls. But by taking appropriate steps to mitigate your inheritance tax (IHT) bill as well as avoiding capital gains tax (CGT), you can optimise the value of your property and protect the future income for your family.
Usually, if you want to transfer a buy to let (BTL) property to your children, CGT liability would apply because HMRC states that the parent received the market value of the property - even if the property was handed down for free. That CGT will be based on current market value, minus purchase price, minus capitalised refurbishment costs.
Currently, the rate of capital gains tax to be paid on BTL properties – after using the £11,700 CGT annual allowance – is 18% for basic rate taxpayers and 28% for higher rate taxpayers.