cgt and changing house ownership

markwi

my mother recently approached me with an offer to finish off her mortgage (approx £7000),in return she will put the house in my name and she can live there rent free.since my father died a couple of years back she has been paying the mortgage with their joint pension,this has left her skint every month so if i pay the mortgage off this will free up her pension for her to spend.the house is worth about £70,000 and she will be living there long term as she is only 63.
what will be my liabilities regarding capital gains tax? iv been told by a work colleague that after 7 years of my ownership id be able to sell the house without being taxed. iht wont be an issue as this house is her only asset .
thanks in advance,apoligies if iv posted in the wrong place.

muskoka

Your colleague is incorrect. I believe your colleague is referring to inheritance tax which is completely different to Capital Gains Tax. CGT is a bit of a minefield -so make sure you check out the CGT implications properly.

silvercar

As well as CGT you also need to look at "deprivation of assets" in the event that your mother needed to go into residential care.

As far as CGT goes, you will have a liability based on the difference between its market value now and the value when you sell it. You get a CGT allowance, currently £10,100 and the remainder is taxed at 18%.

sunshinetours

It would be effectively a gift with reservation as your mother would be living there rent free, so you may well have some tax issues yes. IHT is not an issue by the sounds of it. Get some professional advice if you are thinking of doing thsi though

Plenty of material on this site on the pitfalls of "not so old" parents giving away their main home i.e kids go bankrupt, fall out and turf out parents etc

A better way may be to "lend" your mother the money if you can borrow it yourself so that you create a genuine loan relationship that would get paid back from the future estate. No reason why market rate interest cannot accrue on it either although you would need to declare that on your own tax affairs

If it was me and I was able to I would help out by paying the mortgage. I do appreciate not everyone is able to though

If its being done to potentially avoid future care fees then thats another matter and you can research that yourself. Deprivation of assets has already been mentioned above

PS to add to Silvercars post above. The CGT he is talking about obviously is only when you came to sell that house you inherited / were gifted

markwi

thanks for all the replies,so as i understand it cgt is payable if/when i sell the property and not when the property is put in my name(sorry if i sound a bit thick).
the primary motive is to free up some cash for my mum,so we are also going to explore the equity release route as an option for her.

sunshinetours

Your mother would not pay CGT as it is her main home

Guide here on basics of CGT (and some IHT) http://www.hmrc.gov.uk/cgt/intro/

The deprivation of assets is possibly more relevant if future care is needed but the bigger issues are as stated before

Equity release should be well researched and gone into very carefully. Your mother is relatively young for this so the likely amount released for the house will reflect that I would guess

CLAPTON

your mother at 63 is very young to give away her only asset
she may well live another 30 years or more
what if in the future she wishes to move; she will need to ask your permission
what if you die then your wife/children will own the property and she may have to move out
what if you get into financial difficulties and your creditors force the sale of the house

all quite madness; just help her out: she's your mother
best just help her with the payments or pay off the entire amount
equity release is not really possible at her age; she's too young