UK Landlord Forum / Life

I own a property outright which is currently rented out.

I am a basic rate taxpayer.

I want to pass this onto my son, in the short-term he will continue renting to the existing tenants. In the future he might move in himself, sell to buy another residential home or just carry on renting it out.

The gain on the property will result in a tax bill of around £22,000 which isn't ideal.

I don't want to create a limited company as I don't think it offers enough advantages other than slightly lower income tax.

My son is currently a student so all the rental income will fall within his tax free allowance.

I think option 1 is to do the transfer as a gift and pay the CGT. In that case does my son have to be the landlord or can I carry on doing the management and having my name on all the rental documents, gas safety certificates, deal with any compliance matters etc.

Option 2 to avoid paying CGT for a few years could be to make my son the landlord, he receives all the income and completes a tax return. On my tax return I declare 1 less rental property. However I think HMRC insist on the legal owner also being the landlord?

Can anyone suggest any other viable options?

I did speak to an accountant who suggested setting up a FIC or limited but I don't think it's worth it, plus I would have to pay 7% SDLT on top of the CGT.

Any opinions would be appreciated

I went through something similar last year — not passing on yet, but looking into the options for my eldest who's starting to take an interest in property.

On your options:

Option 1 (gift and pay CGT) — this is the cleanest route. The £22k hurts but it's a known cost and you're done. Your son gets a clean base cost at today's market value, which means less CGT for him if he sells later. One thing to note: if you gift it, HMRC treats it as a disposal at market value regardless, so you can't avoid the CGT by undervaluing it.

Option 2 (keeping ownership but redirecting income) — be very careful here. HMRC's Form 17 rules are strict. Rental income has to follow legal ownership unless you're married/civil partners declaring unequal shares. You can't just redirect rental income to your son while keeping the title. That's a recipe for a tax investigation.

Something your accountant might not have mentioned — have you considered gifting it in stages? You could transfer a percentage share to your son now (say 50%) and the rest later. Each transfer uses a portion of your annual CGT allowance and spreads the tax hit. Your son becomes a joint owner and can receive his share of the rental income legitimately. Worth running the numbers on.

The practical side people forget: whoever becomes the legal landlord takes on all the compliance obligations. Gas safety certificate, EICR, deposit protection, the lot. If your son takes over, make sure all the paperwork transfers properly — you don't want a gap where nobody's name is on the CP12 or the deposit scheme. I keep all my cert dates in a tracker so nothing falls through the cracks during changes like this.

Definitely get a specialist property tax accountant rather than a general one. The difference in advice quality is massive.