I have savings for my two daughters, and as interest rates are so low in their savings account I think it would be best to invest in property in Manchester instead. I've read a lot about this but am unsure what is gifting and what is selling. For example, my eldest is 18 in two years’ time. My idea is to buy the property now with a buy-to-let mortgage and when she is 18 transfer to her name. If she is in education she can continue to rent the property out. If she is working she can live there and take on a mortgage or transfer the mortgage into her name. When her sister turns 18 three years later the plan would be to add her name onto the mortgage and deeds. Should something happen in between and we cannot afford to upkeep the property, we would sell and the funds split between both children. So I’m unsure whether this is a gift or a sale and what the tax implications are for both. I am a higher taxpayer and the mortgage would be around £125,000, with the property worth around £165,000.  

Arthur Weller replies:  

When you transfer to your first daughter when she becomes 18, this could mean capital gains tax (CGT) for you, if the property has gone up in value since you bought it. Similarly, when the second daughter becomes 18 and the first transfers (say) a half of the property to her, this could mean CGT for the first daughter, if the property has gone up in value from the time she acquired it. If something should happen in between and the property is sold, then whoever is the owner at that point will have to calculate the increase in value between the sale and the amount they acquired it for, and pay CGT accordingly. If the property is sold and the funds split between both children, the splitting of the funds is irrelevant for tax purposes (in theory, IHT could be relevant to these transactions - but very unlikely). It is unlikely that stamp duty land tax will impact on your daughters - due to first time buyers relief.