What happens when.....

[jamandco]

Hi All

I'm building a portfolio of property and paying mortgages on an interest only basis, I dont want to sell the properties...and what I'd like to know is, if in 23 years time when I have to repay the loans, can I simply start fresh re-mortgages on the same properties at 70 years old or could I pass on the properties to my children , putting the properties in their names to help build their portfolios

thanks again everyone

[Simon Dewsberry]

Think you will find that to get a mortgage at age 70 puts you in a somewhat restricted market (at present) but who knows what products will be available in 23 years time .....

Also at present you will have a hefty CG bill to pay on transfer to kids (or anyone else ...other than youor spouse..)

again what the situatin will be in 23 years in very uncertain ...

Plym will , i'm sure give amuch cleare answer for you shortly - our resident tax expert..

Simon

[plym77]

Hi Jamandco

I agree with Simon that your Capital Gains Tax Liability maybe quite hefty by the time you take into account the increase in the value of the properties.

After 10 years of ownership you will have maximum taper relief of 40% and so at least for every 100 you make, only 60 would be chargeable.

You could consider mitigation over a number of years by either gifting elements of the properties into a self-settled Trust (effective for CGT, not for IHT) or to your children, thus utilising your CGT annual exemption each year, exempting approximately £9k chargeable gain each year (if you are married, you could double this by inclusion of your spouse), but it depends on the values involved as to whether you can consider this or not. Also remember, that your children would ordinarily be entitled to the rental profits on shares of the property/ies that they own.

Also, do remember that transfers of properties to your children could cause a Stamp Duty Land Tax issue (particularly as you will have resident mortgages) and it is probable that if you were to give them several properties, that they would be amalgamated for SDLT purposes, increasing the % rate at which the SDLT would be charged.

If you are not wishing to make any future plans yet, then I would recommend that in 10 or so years time (if you have not looked at planning before this), you should look at this issue in detail, you will be that much older then, with possible Inheritance Tax issues and you may decide that it is the right time to look at some gradual planning involving your children or a Trust in order to mitigate for both CGT and IHT purposes. Of course, after 10 years you will have maximum Taper Relief too... assuming it hasn't been replaced by something else in the meantime!

I hope this helps to clarify issues for you. Forward planning is always the best policy and sometimes by having a rough idea of how you want the future to pan out, will mean you have the advance warning to try and do something to better the tax situation - sometimes tax planning has to be done over a number of years in order to provide the best result.

Kind regards

Sherena Glanton CTA

(Plym 77)