Selling home, buying cheaper, Capital Gains Tax

minerva123

If parents were selling their home (mortgage free) and buying a cheaper one, and wished to gift all the profit monies to their adult child to put down a large deposit on their new home, would CGT have to be paid? Thanks in advance.

Tixy

If they are selling the home they live in (their principal private residence) then when they sale it it is exempt from capital gains (assuming its always been their main residence whilst they have owned it).

If they gift money to a child (from whatever source) then there is potentially an inheritance tax issue. It is known as a potentially exempt transfer. If they live for a further 7 years after the gift then would not have an inhertiance tax to pay on their death (it would no longer be considered part of their estate).

If the home they are selling is a second home, or one they have not been resident in then there could well be capital gains tax to pay (and gifting some of the proceeds to anyone would not alter that).

This is just tax related - others may advise on whether it could be an issue in relation to deprivation of assets if they have care fees in the future.

00ec25

no - since the profit comes from sale of the (exempt) main home

but the gift would be a potentially exempt transfer for IHT purposes - which may or may not be an issue depending on how much their estate is worth at time of death and how long it is before they die - live a further 7 years and its no longer an issue for IHT

you will soon get lots of other replies taking about deprivation of assets issues

minerva123

Thanks for replies. Principal (only) home. Parents early 50's, (so hopefully no care issues and both hoping to live more than 7 years, though no guarantee for anyone is there!).
Selling c£200k, purchasing another for c£150k, gift would be c£50k so inheritance tax should not be an issue?