A difficult time

flowers2veg

My Mum died, leaving my Dad who is struggling to make ends meet. We offered to have him stay with us but he does not want to leave his home and has suggested that we purchase his house for £40,000, which remains under mortgage at the moment (currently the house is worth £105,0000). The house is currently left to me under his will anyway. My question is this, will it be worse for me owning a second home, with capital gains or inheritance tax.

Thankyou so much for your help

Confussed Karen

CLAPTON

what is the house worth
what is the mortgage
does your father work
what is your father's income
does he receive any benefits
how old is he

flowers2veg

The house is worth £105,000
My Dad is a pensioner
No Savings
In receipt of pension credit
Does this help
&thanks for any help

flowers2veg

Sorry forgot the mortgage is £40,000 and he is 72 years old
Many thanks again

CLAPTON

40,000 in cash may effect this pension credit ...I'm not expert on the benefits issues but you need to look into this first before

maybe better to simply help him pay the mortgage

Debt_Free_Chick

flowers2veg wrote: »

Sorry forgot the mortgage is £40,000 and he is 72 years old
Many thanks again

Does he have life assurance or mortgage protection insurance. If not, then how will the mortgage be paid off when he dies?

If it's not paid off, then you won't inherit the house as such, as you'll need to pay off the mortgage. In this situation, could you not afford to pay the mortgage instalments - it's probably only the same as paying off the mortgage when he dies (not in financial terms, but so far as circumstances are concerned).

If he does have insurance to pay off the mortgage then it may be worth considering helping him out financially on a monthly basis anyway, if only to help him "be comfortable" in old age. But that rather depends on whether you have the means to do that.

zygurat789

To answer your question. From what you have told us it does not appear as if there will be an inheritance tax liability when your father dies. You will have a potential capital gains tax liability which will crystalise when you eventually sell the house. The CGT liablity is calculated, briefly, by deducting your cost price from your selling price. The latter is what you receive but the former will be an estimated value either the probate value if received on death or an agreed value with HMRC if you take over the house from your father.
You said "we" in your op so presumeably there are at least two of you, if you owned the house jointly you would each have an exempt amount of £10,100.
So if you can agree a high probate or transfer value
you would have to have an appreciation of 20% in the value of the house before capital gains became an issue.
Houses are not going up by 20% at the moment.

flowers2veg

Thankyou all for your replies, you have really cleared up my confussion for me, you are all stars, thankyou

Karen