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capital gains help!
Tessmaz
Posts: 24 Forumite
Help needed!
This is a long story cut short...My dad has a property in another city to me he helped me out 7 years ago and brought a property for me (as i couldn’t get a mortgage) by remortgaging his property for a further 85k, we don’t think he will get an extension on his mortgage this year as he has reached the age of 60 was self employed but not worked for almost a year due to health reasons. He has 34k left of his own mortgage to pay, which his endowment is in line to pay this off, so he will still be left with the 85k..I am not sure if i will get a mortgage still with how tough it is now but could still try, he is considering selling his property paying off the full 85k move in with me and i pay him an income monthly so he can afford to live! My main question is will he have to pay capital gains tax on this and would he avoid this if i mortgaged the property..in other words what is the best option not to pay CGT if this is possible??? Please help!
This is a long story cut short...My dad has a property in another city to me he helped me out 7 years ago and brought a property for me (as i couldn’t get a mortgage) by remortgaging his property for a further 85k, we don’t think he will get an extension on his mortgage this year as he has reached the age of 60 was self employed but not worked for almost a year due to health reasons. He has 34k left of his own mortgage to pay, which his endowment is in line to pay this off, so he will still be left with the 85k..I am not sure if i will get a mortgage still with how tough it is now but could still try, he is considering selling his property paying off the full 85k move in with me and i pay him an income monthly so he can afford to live! My main question is will he have to pay capital gains tax on this and would he avoid this if i mortgaged the property..in other words what is the best option not to pay CGT if this is possible??? Please help!
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Comments
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If he is selling what has always been his principal residence there will be no CGT to pay.I'm a Forum Ambassador on the housing, mortgages, student & coronavirus Boards, money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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so if he never sells the house i live in and moves in with me he will not have to pay CGT??0
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so if he never sells the house i live in and moves in with me he will not have to pay CGT??
No.
You have one exemption that is for your principal private residence. So if he helps you buy a home but doesn't live in it, he still gets his exemption for the home he owns and lives in. That is the question I thought you were asking.
If he buys you a home and after a few years moves in with you, he would be exempt for the time he lived in it - to include the last 3 years of ownership whether he lived in it or not for the total 3 years. So if he bought a home for you 7 years ago then lived in it for 5 years, he would be exempt for five twelfths of the total gain. If he bought a home for you 7 years ago and then lived in it for one year he would be exempt for three eighths the total gain.
He would also have a personal CGT allowance (£10,100) if not used elsewhere.I'm a Forum Ambassador on the housing, mortgages, student & coronavirus Boards, money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
so if he never sells the house i live in and moves in with me he will not have to pay CGT??
I don't exactly know what you are asking, but if he never, ever, ever sells the home, there is no CGT on death.
There is an argument that if he took the mortgage out for you and you have paid the mortgage and all the maintenance for the whole time and he only put the property in his name as you couldn't get a mortgage, then you are actually (in tax terms) the beneficial owner, even if it is registered to him. As such there would be no CGT to pay as it is your home that you have always lived in. You would have to prove this to the revenue.I'm a Forum Ambassador on the housing, mortgages, student & coronavirus Boards, money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
sorry i know this is all confusing but your info has helped! My dad lives in a house which is morgaged, he brought me a house but increased his mortgage to buy my house outright...he now is not working and wants to sell his house and move in with me (which is fine) the sale of his house will more than cover the full morgage on his property, so once sold he will live with us in this house which he owns (although i pay him rent and sort all maint of this house)...we will both be mortgage free although i will continue to pay him some money as an income through retirement, but thats by-the-by.. or i could go for a mortgage for the 85k and pay him off...he still wants to sell and live closer to us so could buy another house close to me! I understand we need some financial help to discuss this all with but just wanted to see the cheapest option...0
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The whys and wherefores of mortgages are completely irrelevant for CGT calculations.
So he bought house A years ago and lived in it throughout ownership and now sells = no CGT as principal private residence throughout.
He bought house B (for you) and rented it (to you) and then moves in. So either
(i) he never sells it = no CGT as it is only the sale that triggers a CGT liability or
(ii) after living in it a while he decides to sell. At the point CGT liability is triggered. This will be reduced by the time he has lived in it (to include the last 3 years of ownership - even if he didn't live in it for 3 years), letting relief (google it, its worth upto 40k) and his personal CGT allowance, currently £10,100 (if not used elsewhere) or
(iii) at some point he decides to transfer some or all the ownership to you. This counts for CGT like a sale.
For you to get a mortgage would mean he transfers ownership to you, so that triggers CGT; but if he moved in first that would reduce the bill by access to letting relief and the last 3 years rule.I'm a Forum Ambassador on the housing, mortgages, student & coronavirus Boards, money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
perfect thank you so much0
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Silvercar has coveredd the CGT info but you mention you paying him an "allowance"
If he moves in with you and he owns that house then consider paying him for renting a room under the rent a room scheme which means you can pay him up to £4250 a year with no tax implications. Depends if the amount you are paying him is more than £350 a month I guess
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_40178040
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