Saving money by living with the children
Now this is a tip to either gladden the heart of fill the same with dread. But saving money by living with the children not only has significant tax benefits, it also has the plus that it has stood the test of time as a tax avoidance tip, unlike many of the others that have been steadily removed by legislation (and every time I see Gordon Brown and his ‘mini me’ Alistair Darling these days, the Beatles ‘Taxman’ sounds less like a whinge and more like a prediction).
The Schmidt Report is a UK newsletter dedicated to saving you tax. They reckon that one of the classic ruses, giving the house to the children but continuing to live in it, is a non starter, and doesn’t in fact save you any inheritance tax (IHT). The taxman looks at the gift, and taxes the recipients on your death anyway. However, if you make the gift AND invite the new owner (the kids) to live with you, you DO get the benefit. The threshold at which IHT kicks in is £315,000 currently, and if you and your partner both own the property you get two lots of allowance. So there is a big incentive toward saving money by living with the children here.
So you could, in theory, pass on tax free property of £630,000 to the children. Impractical for a lot of us, but if you can construct granny flats, separate living areas, there are possibilities. We would advise in the latter case to check the tax implications of changing the property’s setup with a tax lawyer. If you can stand each other’s company after the trials and tribulations of adolescence, then saving money by living with the children could be a big earner. Read more on Pension choice advice and tips for older readers.
