Tax efficient ways to gift property

If you have a child or elderly relative who needs somewhere to live and have cash in the bank, falling house prices and low interest rates may tempt you to buy. But make sure you structure the purchase correctly for tax purposes, says Mark Bridge in The Times.

The key issues are capital gains tax (CGT) on any future disposal and income tax on rental income. If you are rich enough, and intend to help your children, the ideal solution is to gift a property outright, says Tony Mudd of independent financial advisers St James's Place. As long as you survive for seven years, the gift is exempt from inheritance tax (IHT) and your children can live rent-free.

Or you could gift it to a trust fund in their name, says Andrea Watson in the Daily Express. These are not the "preserve of the rich", says Bob Wheatcroft, a tax partner at Armstrong Watson. A trust holds the property as the child's main residence for CGT purposes, but it still allows parents to make "all the important decisions". This means excessive sums don't go to children prematurely and retains the CGT exemption on the main home.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up