Can you advise me please?

sea_jay

Can I add a question? My mother invested £4000 (25% of the value at that time) in her father's house in 1984. He is now dead and the house sold. Her share of the house sale is in the region of £20000. As a pensioner, will she be liable to pay tax on this money? I ask as she's already said she doesn't need the money and has decided to give all of this money to me to pay off my debt. So will she or I be liable to pay tax on this on this £20,000?

Thank you in advance and I'm sorry if I haven't posted this in the right part of the forum.

RAS

Check out deprivation of assets. If your mother recieves any benefits at all.

Tixy

She is likely to be liable to pay capital gains tax on the gain. In practice it will probably only be a small part of the £20k received. The gain would be what the current proceeds are, less what she paid, less any legal costs that she might have paid less her CGT annual exemption if not used already (approx 10k). So at a quick look the gain she would pay tax on might be £6k or so.
And the tax rate would be at 18%.

Thats just a rough guide - there can be some quite complex rules, especially when transactions are between family members. Was the house now sold to someone outside the family - eg at market value? Was the house worth £80k in total on the open market?

As a seperate issue if she gifts you £20k then should your mother die in the next seven years the gift she paid you could be liable to inheritance tax after she dies (although that would depend on the value of her estate at that time).

Again as its tax related there are some complex rules involved. You could take a look at the HMRC website or may need to get an accountant's advice.

sea_jay

My mum only receives her old age pension. What is 'Depravation of Assets'? and how do I check it out? Should mention we live in Scotland - don't know if that makes a difference.

king100

Tixy wrote: »

As a seperate issue if she gifts you £20k then should your mother die in the next seven years the gift she paid you could be liable to inheritance tax after she dies (although that would depend on the value of her estate at that time).

But she can gift tax free a set amount per year £3000 per year that is excempt from tax.

Also tax on the 20k would differ every year she was alive to the 7 years.

RAS

Deprivation of asets is when someone gives away money which could be used to reduce the benefits they currently receive or may receive in the future, including things like care home fees. Depending on the benefit, you are allowed £6000 or upto £16,000 capital before the benefit reduces.

king100

Not wanting to assume anything but hasent your mum for the last 7 years been gifting you 3% of the value of the house to you. If you know what I mean.

sea_jay

Thanks for your advice guys.

I suppose, at the end of the day, we'd be better to do all this through a properly qualified accountant so it's all above board but your advice has been most helpful.

Thanks again.

sea_jay