Selling my deed of gift house

beetle_71

Hi
My parents made their (outright owned) house over to me via a deed of gift in 1993. My mother passed away in 1995, my dad died last August. This house is in Derby and all the bills have been in my name since August. I am now looking to sell the house to buy myself a house in Dudley where I am currently living and working.
At present I live with someone (I am not included on his mortgage) and my daughter, but the relationship has come to an amicable end so I will be looking to purchase somewhere for my daughter and I to live on our own.

What I want to know is how I stand with tax. What will I have to pay if I'm swapping one house for another of the same or similar value?
If so how much can I expect to pay? The house is roughly worth £200,000
My point here is if I were to move to Derby (which is not practical) and live in the house I wouldn't be paying any tax, so I don't see why I should I pay any if I just swap one house for another?
Or doesn't it work like that!

I hope someone can help me out here, it's causing me so many headaches!

Many thanks

BitterAndTwisted

No, Capital Gains Tax doesn't work like that. What matters is the value of the asset now and how much it has increased since it was passed to you. However, there is an annual allowance, I believe.

More knowledgeable posters will be about quite soon

RAS

Have you got probate?

Has the property been registered in your name?

If yes to both, how much has the property increased in value since it was registered in your name?

BitterAndTwisted

Why would the OP need to have got probate if s/he's owned the property since 1995?

RAS

BitterAndTwisted wrote: »

Why would the OP need to have got probate if s/he's owned the property since 1995?

Arggh.

Oh dear. If she had just inherited then there would be little or no CGT to pay.

However the property is likely to have increased in value since 1993.

No clear why they thought this was a good idea?

Not helpful with IHT as it appears to have been a gift with reservation?

xylophone

The house was gifted in 1993 and the OP has never lived in the house as her principal private residence.

From the point of view of saving IHT it would have been ineffective as a potentially exempt transfer unless the parents were paying a market rent to live in the property.

However, it may be that the value of the estates of both parents was below the IHT threshold.

CGT is a different matter. http://www.hmrc.gov.uk/cgt/property/basics.htm

beetle_71

The house was made over to me when my mum found out she was terminally ill with a clause that they could both live there rent free until they died. She was advised by a solicitor to make the house over to me as a deed of gift A) to prevent another woman coming into my dad's life and taking what mum saw to be my inheritance and if my dad needed to go into a nursing home I wouldn't have to sell the house to pay for his care.
In 1993 the house was worth approx £85,000.

00ec25

beetle_71 wrote: »

The house was made over to me when my mum found out she was terminally ill with a clause that they could both live there rent free until they died. She was advised by a solicitor to make the house over to me as a deed of gift A) to prevent another woman coming into my dad's life and taking what mum saw to be my inheritance and if my dad needed to go into a nursing home I wouldn't have to sell the house to pay for his care.
In 1993 the house was worth approx £85,000.

your gross gain is 200 - 85 = 115,000 (you can also deduct EA and legal fees for the sale)
you have a personal allowance of 11,000
so your taxable gain is 104,000 on which you will pay CGT at 18% and 28% depending on how much income earn that tax year

for example suppose your annual pay is 25,000, that leaves 16,865 of the basic rate band
so your CGT payable would be:
@18% 16,865 x 18% = 3,035
@28% (104,000 - 16,865) x28% = 24,397

so out of the 200,000 sales proceeds you will be left with 172,568 after tax

parents putting their house into their children's names is a guaranteed way of making the children end up paying tax that would not have existed if the parents hadn't bothered in the first place, although in your case it appears the parents had non financial reasons for doing it so the fact you are now voluntarily paying tax is a mere side effect of ensuring the "other" woman didn't get it and that the council could not claim it - parents gamble did not pay off and you will have to pay the tax as a consequence

purple_haze

OP, I don't think you need to be concerned about capital gains tax.

The crucial point is that your parents in the Deed of Gift reserved the right to themselves or the survivor of them to live at the property rent free. This created an interest in possession trust in their favour (go to this link in HMRC’s Capital Gains Manual to see the circumstances in which HMRC accepts that a trust has been created).

Accordingly the trustee of the trust (who appears to be you) can claim principal private residence relief up until the death of the surviving life tenant (your father) in August last year and for 18 months following his death.

All you need do following the sale is instruct an accountant to file the necessary tax returns and claim the relief.

beetle_71

Thanks for your help purple haze.
So just to be clear 'cos all this is well out of my remit... I sell the house via an Estate Agent, pay all the relevent taxes and then visit an accountant who will be able to claim it back?
Also, do you know if I am I better to sell and buy at the same time, or can I just sell and bank the money until I find somewhere to live?
I know absolutely nothing about house buying and selling. I assume I would need to see a solicitor for some things too?