Capital Gains Tax

leftatthelights

Hi all,

I would like your advice on my current situation.
My mother-in-law has cashed in her pension totalling 50k and has decided she wants help myself and the missus onto the housing ladder by putting the 50k down as a deposit on a house.
We have found a house going for 75k and have just had an offer of 73k accepted by the vendor.

Thing is, the mother-in-law already has a mortgage which she owes nothing on and it will be her and my girlfriends name on the mortgage we are looking at getting (due to me having a terrible credit rating, i cannot go on the mortgage).

My main question is: when we come to sell the property in "x" amount of years, will the in-law have any capital gains tax to pay due to the fact that she has two properties??
She obviously wont be living with us at all but nevertheless her name will still be on the mortgage.

I hope I have explained myself properly?

Any questions please ask away!!

dimbo61

Dont tell the mother-in -law about the girlfriend!!!
Now you have not given the GF/wife income but if she is earning £15/20K herself then she can get £45/60K mortgage in her own name and the MIL could help with a £13/28K deposit.
If you got an offset mortgage with Yorkshire building Society she could then put the rest £37K into the offset account ( friends & family in HER NAME ) and save you interest on the mortgage payments.

AdamBrunt

You have explained yourself fine - but I am not sure of the answer.

Basically, you're asking for CGT on "2nd homes" ... which does the IR take into account, the name on the mortgage or the name on the Deeds ? I am not even sure if they are not one in the same thing ?

shop-to-drop

She would only have to pay capital gains on any profit made when selling ie price sold for less amount paid. Hopefully there will still be a tax free amount ATM this is the first £10K profit.

So unless house prices shoot up I think the amount of CGT will be minimal for MIL and hopefully she will still want to help you out.

leftatthelights

Thanks for your replies, I will have to continue this later, after work!:o

leftatthelights

Hi again,

I have been told by a few people at work that as long as the house isnt sold within 3 years, we will be fine??

Is there any truth in this??

CLAPTON

in general the mortgage company will insist the names on the mortgage are the same as the names on the deeds

as she doesnot live in the house then when the house is sold then she will be liable for cgt on her half... no point in discussing cgt as the rules are liable to change tomorrow.

the three year rule doesn't apply in this case (and in any case it's the exact opposite)

brit1234

leftatthelights wrote: »

Hi again,

I have been told by a few people at work that as long as the house isnt sold within 3 years, we will be fine??

Is there any truth in this??

Don't think so, taper relief is likely to go tomorrow in the budget. Wouldn't worry about CGT anyway, house prices have started to fall again and likely to fall a fair bit. Most likely you won't have any CGT when you sell.

CLAPTON

brit1234 wrote: »

Don't think so, taper relief is likely to go tomorrow in the budget. Wouldn't worry about CGT anyway, house prices have started to fall again and likely to fall a fair bit. Most likely you won't have any CGT when you sell.

indexation and taper relief went last year when the rate was reduced to 18%

leftatthelights

I think the best bet for me/us now is to wait until the budget is released tomorrow then get the missus and MIL to see an advisor armed with the new budget knowledge.

It might be best for us to do as dimbo61 has suggested.

I just dont want any nasty surprises whenit comes to selling in the distant future when the prices have risen!

leftatthelights

Ok, so the budget today hasnt had any effect on my original CGT question!:D

Can I ask some specifics now.

The wife and MIL buy the house for 73k in a joint mortgage.
Its is the MIL's 2nd house but the wife's 1st house.
Say in 10 years we sell for 100k and assuming the CGT law stays the same (doubtful I know), this is how I see the CGT being calculated:

27k profit to be split between MIL and wife, this leaves 13.5k profit each. Because it is the wife's first house, she pays zero CGT on her half of the profit whereas the MIL will pay CGT on her half minus the 10.1k allowance which leaves her with a taxable amount of 3.4k which leaves the MIL with a CGT bill of £612.

Can anybody please confirm my calculations???

I think im there or thereabouts?

Thanks.:D