My mum and I would like to buy a property together as joint owners to rent out. My mum can access the whole cash amount immediately to invest, but I cannot access my half for another 3.5 years. What is the best way to buy this, jointly now so locking in today's value rather than waiting? Are there any tax implications for her or me if I pay her my half, about £50,000 maximum, in 3.5 years’ time? Would she have to pay tax on the money that I pay her?
Arthur Weller replies:
If your mother buys the whole house in her name now, and sells you half in 3.5 years from now, then quite likely the market value of the house will have risen by then, and according to the capital gains tax (CGT) rules she will be deemed to transfer to you then at the market value (since you are 'connected' to her). This would mean a capital gain for her, and if the gain is more than the CGT annual exemption (currently £11,700) she would have to pay CGT on this excess. Additionally, quite possibly you would have to pay stamp duty land tax (SDLT) when you buy from your mother in 3.5 years from now - depending on what other properties you own, etc. The best solution, from a tax perspective, would be for each one of you to buy half the house now, and for your mother to lend you the money to do so. You can draw up a proper loan document between yourselves, giving your mother a charge on the property to secure her loan.
This question was first printed in Tax Insider in November 2018.