buying a house from my father

holly_hobby

This isn't technically a gifted deposit (family or otherwise), it is a sale at undervalue, which are 2 different things (ie. essentially there is no monetary exchange between the 2 parties). To top and tail, family (close relative) gifted (ie - not made in return for any consideration)deposts are ok, Builder deposits are capped at 5% and for new build only, whilst Vendor deposits are not accepted across the board.

Re the CGT aspect and calcs.

Market value 140k LESS acquisition price or market value at time inherited (which is important in our calcs here).

( Dad won't be able to offset the upgrading/renovation costs (which don't inc general decorating and up keep), if there is no proof or receipts for the works in his name. Indeed as we know Dad didn't actually incur/abosrb the costs of the upgrading exercise ... you did ... and to state otherwise and attempt to reduce his gain for CGT exposure, would essentially be tax fraud - so lets leave this out for now).

So .....

His CGT exposure will be ...

140k market value at 2012 LESS market value (at the date of death of the benefactor) .... this will give you his gross exposure.

We know he can't deduct improvement costs, and there was no cost of acquisition or marketing costs, but he may deduct any fees associated with the disposal of the property to you (ie solicitor fees, accountancy fees if he uses one to calc the CGT and administer his SA rtn)

This gives him his gross gain, from which he then deducts his annual unused personal allowance of £10,600 (for 2012/13 tax yr) (plus any allowable losses for the tax yr).

This will give him his net gain for CGT liability purposes ....

He then mulitplies his net gain by the correct tax rate for his tax status (e.g - if he is a basic rate tax payer its 18%, if he is a higher rate tax payer its 28%)

This will give him his actual tax liability in repesct of the sale (disposal), which is duly reported to HMRC via his annual self assessment return.

The calcs look a bid daunting, but honestly simple once you break it down, and there is plenty of help here if needed, or of course Dad could consult a tax advisor to administer the return for him.

Hope this helps

Holly x