Buying a house 50/50 with parents

M_A_R_K

Hi, I wonder if I might canvas some thoughts. My parents own a house with no mortgage. They are looking to sell and move. Are there any Inheritance Tax or Capital Gains Tax implications if my parents and I go 50/50 on a cash purchase of their next house. They get to free up some capital from the sale of their house as they are only having to pay half towards the next and I am investing in bricks and mortar with the prospect of future house price rises. I could even increase my % share of their home by paying more to them over the coming years.

RAS

What happens if you marry? Or even worse divorce?

Or go bankrupt?

sandsni

OP you're probably genuine, but there's been an awful lot of posts from "Newbies" asking pretty much the same thing over the past couple of days and I'm beginning to wonder if it's spam/troll. If you are genuine, then search the forum over the past few days and you'll more than likely find the answer to your question.

M_A_R_K

In answer to the post about what if I marry, divorce etc. I see that this has little to do with the answer, Inheritance Tax or Capital Gains Tax is not limited to married people, unless I am missing the point. As it happens I am married.

No this is not spam, and yes I have looked at previous posts, but they talk about getting a mortgage, which I have no need to. Also, they talk about charging parents rent, which I would not look to do. My aim would be for a long term investment that would hopefully see my investment in the house increase, as the prices rise.

Yorkie1

The point about your marriage / divorce / bankruptcy, is that your proportion of the house would be part of your assets - it's not a tax issue.

kingstreet

Inheritance Tax

Would depend on the overall size of the estate of the deceased. Presumably the property would be held as tenants in common, so the share of the deceased would pass into their estate and be distributed according to their will?

£325k current nil rate band and transfers between spouses exempt.

Capital Gains Tax

If the property is the primary personal residence of all three of you, there would be no CGT on its sale.

M_A_R_K

I would not plan to live with them, simply pay half towards a cash purchase towards a new house. Then, when they decide to sell at the prevailing market rate, I take 50% of the sale value. With this in mind, would I be liable for CGT?

00ec25

M_A_R_K wrote: »

I would not plan to live with them, simply pay half towards a cash purchase towards a new house. Then, when they decide to sell at the prevailing market rate, I take 50% of the sale value. With this in mind, would I be liable for CGT?

yes you certainly would be
CGT would be based on the difference between original purchase price and eventual sale price since you are buying in the open market

note if you buy out your parents then in that specific case the "cost" at which you acquire the additional share of the property in CGT terms is not what you actually pay them (which can be any figure you want) but is in fact what the property is worth at the time of the transaction - this is because you are classed as "connected persons" so open market value prevails not actual cash paid

RAS

M_A_R_K wrote: »

In answer to the post about what if I marry, divorce etc. I see that this has little to do with the answer, Inheritance Tax or Capital Gains Tax is not limited to married people, unless I am missing the point. As it happens I am married.

OK - so if you go bankrupt or end up in an IVA, the OR will expect to use the value of the property in which your parents live to pay your debtors.

If your marriage breaks down, your spouse will get something between 40-60% of your share of the house.

In both cases, an order for sale is possible so your parents would have to move.

Simples.