Assigning property income to my partner

So what exactly is she getting out of this relationship ?

And are you expecting her to give the income back to you after she has been this tax evasion mechanism ?

The rest of my estate if I die before her. And her estate will go to her nephew and niece if she dies before me. We're both perfectly happy with all the financial arrangements in our relationship.

No. This is a gift. I have more income than I spend anyway by a substantial margin.

Tim.

Tax evasion does not come into it. the OP is asking whether there is a legal way of reducing the tax.

Another aspect of this is that the couple are not married. they should therefore take care because gifts between them will count towards their inheritence tax calculation if they die within 7 years of making them. For eample, a married couple might gift the house one to the other in order that the income will arrive on the appropriate spouse's tax assessment. For married couples there are no IHT implications.

As I understand it, you cannot 'redirect' the income otehr than by changign ownership oft he house. Of the house is in joint names you can do this simply by writing a letter gifting a part of it. but, as I said, watch out for IHT. if you gift a hous eback and forth you can potenitally be assessed for IHT on the sum total of all the gifts (if you are not married).

Robert

:-( At the moment, the CGT saved by keeping the house in my name exceeds the income tax I will have to pay on the income from the house. (assumes that house prices continue to appreciate - ideally I would want to gift it to her just before any house price crash so that then she can hold it for long enough to get taper relief on any eventual gains but I doubt that I will be able to get that timing right ;-)

Could I give 1% of the house to her but 99% of the income?

Interesting, thanks. I hadn't thought of that. Sounds surprising though. So a single 100k asset swapped back and forwards each year could potentially be valued as a 400k gift if the wrong person died at the wrong moment? Can this be avoided if the gift is given in the right manner (for whatever definition of right). Can an unmarried couple use up their annual CGT allowances by gifting appreciating assets backwards and forwards without risking being made completely bankrupt if one of them dies?

What would happen if say, A gave everything to B who then gave everything to C. A then dies. Presumably B now has the IHT liability but has no assets to pay it and just declares themselves bankrupt. Or can the tax office chase C?

What about if B dies so C pays IHT and then A dies. Is the liability wiped out? What about A->B->C->D and then C, B, A die in order. D could potentially face a 120% tax bill on the gift.

Tim.

How about I pay her to do my accounts for the house?

How much could I pay her?

And would she end up as an employee?

Tim.

Fantastic. Thankyou.

I'm not sure I understand all that stuff about partnerships so I'll definitely need to talk to a lawyer (will anyway about getting the house in joint names) but it looks perfect.

Tim.

A's estate pays the tax. So A's executors would pay it from whatever money A had not given away. If A's estate did not have enough left to pay the tax I think someone (tax authorities or executors) approach B for the money. Of course B might be surprised by this as he might have received the gift 7 years earlier and assumed that it was his to spend.

I uppose (awit correction) that in th elong chain the tax people would come to B,C,D in order. But there is 'rapid succession relief'. If B dies soon anfer A then there are rules to reduce the tax somewhat. Also there is a taper pver the 7 years but it does not work as you might expect (or as many people imagine).

BTW, there is no capital gains tax at death, so that's good. The worst thing to do is realise a large capital gain and then die shortly afterwards. You get to 40% CGT and then 40% IHT on what's left. If you die hodling a large unrealised gain then your executors sell the assets but only IHT is payable.

You should get married, then you can pass assets back and forth withour accumulating an IHT liability and without triggering CGT. Also, ther eis no IHT for money you leave to your spouse. :-)

Robert

....> > What would happen if say, A gave everything to B who then gave

I should have been more precise. A's executors have to pay the tax BEFORE they they get probate. So they cannot, initially, use the assets of the estate to pay the tax. They have to borrow this money form somewhere, pay the tax, then get probate, then sell the assets and then pay back the loan.

Robert

Often banks / building societies will be prepared to write a cheque for the assets direct to the IR to pay IHT.

Not wishing to look on the dark side, but, nevertheless doing so: you should be clear that you really are giving her a chunk of the property. If the relationship ends, for example, she does not have to give it back to you. If she goes bancrupt someone else might have a claim to it.

Robert