Selling a house part owned with my mother, tax implications?

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    Selling a house part owned with my mother, tax implications?

    I own half of a converted Victorian property split into separate dwellings. My elderly mother owns the other half. She currently lives with me in a separate property, and wishes to relinquish her half of the other property. She has no other financial interests at all. If we decided to sell, what taxes would we need to pay? We’ve already had planning issues pop up which I’ve discussed elsewhere, but where would we stand on capital gains and inheritance tax if she transferred her half to me before sale?

    #2
    Assuming you are tenants in common, if she gifts you the property, it would take 7 years to leave her estate for inheritance tax purposes.
    It would be a CGT "event" and she would be liable for the CGT based on market value at the point of transfer.
    You would be liable for SDLT (at the surcharged rate), again based on market value.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thanks for the reply. Would she be liable for CGT if she is living at the property as her main residence? And would that also be the case for IHT purposes?

      Comment


        #4
        She isn't liable for CGT for any of the period when the property was her principal residence.
        Obviously, the CGT liability would then transfer to any other property she owned at the same time that wasn't her main residence.

        If she lived in the property she's meant to have gifted without paying full market rate rent at arm's length, it would keep the property in her estate for IHT.
        Google "Gifts With Reservation"
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Originally posted by jpkeates View Post
          Assuming you are tenants in common, if she gifts you the property, it would take 7 years to leave her estate for inheritance tax purposes.
          It would be a CGT "event" and she would be liable for the CGT based on market value at the point of transfer.
          You would be liable for SDLT (at the surcharged rate), again based on market value.
          Correct and agree, except that SDLT is not payable on gifts (assume no mortgage involved).

          I can't see any point in her transferring to you immediately prior to sale - what are you trying to achieve here?

          I don't think she plans on living in the place after the gift from what OP says?

          OP says mother does NOT live there in post one, but that she might do so on post 3. If this is an attempt to avoid CGT through a pretence residence - DONT.

          Comment


            #6
            To answer post #3 more explicitly. Yes it might make a difference to IHT if it is genuinely her residence and if her ownership value in where she is staying now is less than 125K and her owned value in the new place is more than the old. But legislation will change before she dies.

            It will make no difference to CGT unless she stays in the new place for a long period of time, and you will then create a CGT problem where she is currently staying.

            Comment


              #7
              Originally posted by AndrewDod View Post
              Correct and agree, except that SDLT is not payable on gifts (assume no mortgage involved).
              You're right and I'm wrong.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Capital gains tax applies after disposal of an capital asset held for more than 12 months. So if the victorian property is sold ( by sale or by gifting ) , 50% of the capital gain due to each of you and mother will be liable for capital gains tax at 18% or 28%. This tax would apply if only mother's half share is transferred to you.There is also capital gains personal allowance of £12,300 which is tax free to each person.

                If the property was previously occupied as your main residence, the capital gain is apportioned between residence period and rental period, and only the capital gain during the rental period is liable to tax.

                Inheritance tax applies to the estate of a deceased person. The first £325K of the estate value is tax free and the excess above £325K is taxed at 40%. If the deceased person leaves the family residence to own children, the tax free portion of estate is increased from £325K to £500K. So for the estate of a married couple, the 40% tax starts to bite on estate above £650K or above £1 Mil ( if the family residence is willed to children ) .

                Estate planning is complex and don't rely on free advice given in forums.

                Comment


                  #9
                  Originally posted by Gordon999 View Post
                  Capital gains tax applies after disposal of an capital asset held for more than 12 months.
                  That's a new one. So all the shares I sold within 12 months at large gain I should be asking for the CGT back. A reference would be greatly appreciated.

                  Comment


                    #10
                    My understanding is that all income ( from job or trading ) during the year is liable to income tax at 20% and 40% etc .

                    But sale of asset held for more than one year is not "trading income" and the profit from sale of shares is treated as "capital gain" liable to capital gains tax at 10% or 20%. But for property asset held for longer than one year, the capital gain is liable to 18% or 28% tax rate but for period under owner occupation , the capital gain is charged at 0% rate.

                    I cannot find any definition of holding period for capital gain posted on the gov website. I suggest you call the tax office hotline and ask for clarification about your situation.

                    Comment


                      #11
                      I have never heard of any of that.
                      If you buy a house in January and sell it in July at 100K profit that is a capital gain like any other

                      And I have never seen any legislation giving a different CGT rate for shares held for 11 months vs those held 2 years.

                      I'm not planning to phone HMRC about the matter....

                      But I'd be delighted if that were the case. We'll see if anyone else agrees how delightful it would be.

                      Comment

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