Pensioner house sale tax query

albalad

Hi there
Looking for an idea of the legal / tax responsibilities of an elderly relative who has just sold off a property which had been bequeathed to them a couple of years ago.
The relative is a pensioner , claiming attendance allowance ,( with no other savings , small monthly income from pension ) the property was sold for approx £80,000.
They had planned to gift the proceeds of the sale equally between grand children , but have since been told by a friend they will need to pay tax on the sale price , and then the grandchildren would have to pay tax on the cash gift also .

Please advise , give us your thoughts

Many thanks

nomunnofun

Friends who are tax experts of course?

1) He is indeed liable for Capital gains tax if the amount that he sold the property for, after costs, was more than £10600 above the value at the time of inheritance. If the value at inheritance was £65000 and he sold it for £80000 after costs, he would pay tax at 18% on £5400.

2) There are no tax on gifts in the UK. The only issue would be inheritance tax on your elderly relative's estate, paid out of the estate, were he to die within seven years of the gift. Even then, his estate would have to be in excess of £325000.

Get those friends to buy you a drink!

LittleVoice

albalad wrote: »

Hi there
Looking for an idea of the legal / tax responsibilities of an elderly relative who has just sold off a property which had been bequeathed to them a couple of years ago.
The relative is a pensioner , claiming attendance allowance ,( with no other savings , small monthly income from pension ) the property was sold for approx £80,000.
They had planned to gift the proceeds of the sale equally between grand children , but have since been told by a friend they will need to pay tax on the sale price , and then the grandchildren would have to pay tax on the cash gift also .

Please advise , give us your thoughts

Many thanks

1 - if they didn't live in the house, I believe they may be due to pay capital gains tax on any positive difference in value, also taking into account the length of time they've held it.

2 - the grandchildren would not have to pay tax on the cash gift though if the elderly relative died within 7 years of the gift their estate could be liable to inheritance tax if the estate was worth more than £325,000 (this year's limit).

laurel7172

Hmmmm....elderly relative in receipt of attendance allowance...

Google 'Deprivation of Assets'. Should this person need a care home, capital gains tax will be the least of their problems. I would be telling any relative of mine that their comfort in their old age is more important than funding luxuries in their grandchildren's youth. And if the grandchildren aren't monsters, they'll wholeheartedly agree.

nomunnofun

laurel7172 wrote: »

Hmmmm....elderly relative in receipt of attendance allowance...

Google 'Deprivation of Assets'. Should this person need a care home, capital gains tax will be the least of their problems. I would be telling any relative of mine that their comfort in their old age is more important than funding luxuries in their grandchildren's youth. And if the grandchildren aren't monsters, they'll wholeheartedly agree.

I had thought of mentioning that - also curious as to where the proceeds of the house sale were deposited, given that he has 'no other savings'.

albalad

Thanks for all replies so far ,

Yes , the friend who I am sure was advising them with the best of intentions has no tax / financial qualifications !

Nomunnofun - the property was only legally inherited 2 years ago , so I would suspect it was probably worth about the same / less than 2 years ago

Little voice - no they did not live in the house and as mentioned above they had owned it for 2 years .

The proceeds of the house sale have , for the minute been deposited in a current account ....... ,!! I know , I know

I agree with the care home sentiment , but not sure if it is different in Scotland

xylophone

http://www.careinfoscotland.co.uk/how-do-i-pay-for-care/paying-care-home-fees/deprivation-of-capital.aspx

heretolearn_2

attendance allowance isn't effected by savings, so no worries there.

margaretclare

heretolearn wrote: »

attendance allowance isn't affected by savings, so no worries there.

AA is non-means-testable and non-taxable. It's irrelevant for the present discussion.