Gift Tax & Inheritance Tax (Confused)

prwaller

Hi,

Would someone be able to let me know the difference between Gift Tax and Inheritance Tax?

Basically 7 years & 8 months ago my mothers house was transfered into her childrens names, but she remained in the property until 18 months ago when she needed to move into a care home. The house was sold 11 months ago and recently my mother pasted away, so I'm now in the process of completing probate / inheritance tax forms and taking into consideration the total value of her assets (house value, etc) we fall under the £325,000 limit.

Does anyone know if this would incur any tax charges, as i'm totally confused by all the paperwork

Many Thanks

CLAPTON

there is no gift tax in the UK

how much was the house sold for
how much else did your mother leave

prwaller

Hi,

The house was sold for £149,000 and we were left £70,000. But the total would need be divided 3 ways for each child.

Thanks

CLAPTON

giving house away is ineffective for IHT purposes (as she continued to live there) as 149,000 plus 70,000 (219,000) is lesss than the IHT allowance 325,000 then there will be no tax to pay

prwaller

Thanks for your response, we were under the impression because our mother lived in the property until 18 months ago we would still be taxed, as we found this mentioned on the HM Revenue website (hmrc.gov.uk/inheritancetax/how-to-value-estate/basics.htm)

"You must also evaluate the following .... Gifts - any asset that the deceased gave away at any time, but in which they kept an interest - for example a house they gave away but lived in rent-free"

Thanks.

dzug1

It is possible you will be liable for capital gains tax if the house went up sufficiently in value between the time it was given to you and the time it was sold.

That's an entirely separate issue from inheritance tax - for which there is no liability given the size of the estate.

Who received the cash from the sale of the house/

prwaller

Hi Dzug1,

The house was originally purchased for £119,000. then over seven years ago was transferred to the childrens names and later on sold for £149,000, the money was then divided between the three children.

Thanks.

KPR11

prwaller wrote: »

Thanks for your response, we were under the impression because our mother lived in the property until 18 months ago we would still be taxed, as we found this mentioned on the HM Revenue website (hmrc.gov.uk/inheritancetax/how-to-value-estate/basics.htm)

"You must also evaluate the following .... Gifts - any asset that the deceased gave away at any time, but in which they kept an interest - for example a house they gave away but lived in rent-free"

Thanks.

The issue it is referring to is known as gift with reservation, it could have resulted in inheritance tax liability, I could go in to the details if you want but the bottom line is that you are below the nil rate band so you are fine - No IHT

KPR11

prwaller wrote: »

The house was originally purchased for £119,000

How much was the value of the house when it was transferred to the children?

prwaller wrote: »

later on sold for £149,000

Is this net of selling costs?