Giving money to kids from house sale

andybodoyd

Hi, we are in the process of selling my mother-in -laws house (She has gone into sheltered housing, the house has been in my wife's name for many years). The plan is to divide the money between the children-approx £120,000 between 5. Are there any implications with tax etc with doing this. Hopefully not but i'll put bets on there are loads!!

Justie

I think you can gift whatever you want to but they would have to declare it and pay tax on it - someone else will have a better idea though I'm sure

Optimist

I believe you can give as much as you wish but if you die within 7 years there will be inheritance tax to pay
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_10010612

gingercordial

Optimist is correct, lifetime gifts are not taxable if the giver survives for 7 years after the gift. I would make sure it is definitely in your wife's name rather than your mother-in-law, assuming (as much as you ever can) that your wife is likely to survive longer than your MIL.

If your wife were to die within 7 years, then this would become taxable if the TOTAL of this gift and anything else she leaves to anyone apart from you exceeds the inheritance tax threshold, currently £285,000.

However, since your wife doesn't live in the house (I assume!) then she is likely to have to pay capital gains tax on the profit on sale. This could be at up to 40% of the gain (ie sale proceeds less her purchase price less any costs of buying and costs of selling) although you do get an annual allowance of £9,200 and if she's owned it for a few years the rate might be reduced a bit by what's called "taper relief". One reasonably simple thing to do is to transfer half of the house into your name (tax-free if married) and then you get to use your £9,200 allowance too. If this is going to be a big number, I would seriously suggest you have a quick chat with a tax adviser who can help you with the forms required - it shouldn't be too expensive (less expensive than getting it wrong!). Try https://www.tax.org.uk to find a Chartered Tax Adviser in your area and phone around for a quote.