How to Use Trusts to Reduce Property Taxes

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Using Trusts to Reduce Property Taxes

By Jennifer Adams, TEP

Property trusts are one of the most underused tools in personal tax planning and one of the most misunderstood. The assumption that they are complicated, expensive and best left to the very wealthy has kept many property owners from a planning strategy that is, in practice, straightforward to establish and capable of delivering substantial savings across income tax, capital gains tax and inheritance tax.

The landscape has never made this planning more necessary. Rising property values mean more estates are crossing the inheritance tax threshold. The freezing of CGT annual exempt amounts has sharply increased the tax cost of disposals. Income from buy-to-let property is taxed at marginal rates, with mortgage interest relief severely restricted for individuals. For many property owners, the question is no longer whether to consider trust planning, it is how to do it correctly.

Get it right, and a property trust can protect assets, reduce tax across multiple heads, and provide a structured mechanism for passing wealth to the next generation. Get it wrong, and the consequences range from unexpected HMRC challenges to failed gifts, clawback exposure and unintended inheritance tax liabilities.

In this practical and authoritative guide, Jennifer Adams — a qualified member of the Society of Trust and Estate Practitioners (STEP), sets out everything property owners and their advisers need to know to establish, manage and plan around property trusts effectively.

This report will show you how to:

• Understand what a trust is and how property trusts are legally constituted
• Identify when setting up a trust is the right planning choice and when it is not
• Avoid the critical trap that affects single property trusts and can undermine an entire structure
• Minimise income tax on rental and investment property income using trusts
• Minimise capital gains tax on property disposals through careful trust planning
• Minimise inheritance tax exposure using trusts, including the use of nil rate band planning
• Choose between different trust types — discretionary, life interest, bare and others — and understand which suits each situation
• Plan effectively for minors, including the use of 18-25 trusts
• Gift property to children or other family members in a tax-efficient and legally robust way
• Transfer property to a spouse using a trust structure without triggering unintended tax charges
• Understand what a deed of trust is and how it operates in practice
• Identify and manage clawback risk in property trust arrangements
• Plus much more…

Who will benefit from this report?

This guide is essential reading for any property owner, whether residential landlord, buy-to-let investor or owner of a family property portfolio, who wants to reduce their exposure to income tax, capital gains tax and inheritance tax through trust planning.

It is equally valuable for accountants, tax advisers and solicitors advising clients with property held personally, jointly or within family structures, and for in-house finance professionals dealing with property-owning entities.

If you own property, advise clients who do, or need a reliable reference for trust-based property planning, this guide belongs on your shelf.

About the Author

Jennifer Adams TEP, FCIS, FATT is a professional business author and accountant specialising in corporate governance and taxation, and Consulting Editor of AccountingWEB. She is the proprietor of Naldrett Accountants, a two-office practice based in Surrey and Dorset.

Jennifer has written for many of the leading specialist providers of legal, tax and regulatory publications, including Butterworths, Tolleys, LexisNexis, BDO, Sage, the Chartered Governance Institute and the Chartered Insurance Institute. She is a Fellow of the Institute of Chartered Secretaries and Administrators, a Fellow of the Association of Taxation Technicians, and a qualified member of the Society of Trust and Estate Practitioners (STEP). She is the author of 101 Property Tax Tips and writes monthly articles and tax guides for Tax Insider.