CGT on gifted house

Beatrice78

Hi I would really appreciate help with this.
About 20yrs ago my Mum put a house in my name that was hers but my Gran lived in rent free.
My Mum died about 10yrs ago and my Gran died 2yrs ago, the house has been rented out for the last 18mths and now the tenant wants to buy the house off me.
Could anyone guide me, if I did sell to her what would I have to pay in tax. I've tried to look into but I'm just getting more confused.
Many thanks
Becky

uknick

The following assumes you live in the UK and are liable for CGT and there is nothing special about how the house was transferred to you, i.e. in some form of trust. I'm also assuming you are the beneficial owner for the time you have owned the house.

You've never lived in the home (i.e. it's never been your primary residence since it was given to you) so all the final gain will be taxable under CGT.

This gain will be the sale price less the "cost".

The cost will be;
the value as at date of transfer 20 years ago (if you did it by the book then you should have this information on the transfer paperwork;
what you spent on
* improvements (i.e. new kitchen, bathroom, boiler etc. but excluding maintenance such as decorating costs);
* fees to transfer the house to you and to sell the house.

You may need to provide proof of costs if HMRC ask.

As you've been renting have you already claimed some of the costs listed above? If so, you can't double count them.

Once you've worked out the gain, take off your annual allowance in the tax year of sale, which will probably be 2015-16 by the time the sale is complete.

This gives you your final taxable gain. This will be taxed at either 18% or 28% depending on your other income.

Beatrice78

Thank you so much for your reply, I really do appreciate it. I understand all your points except 'my annual allowance' Is this the 10k you can earn before paying tax? I earn more than this at work.
Thank you!

CLAPTON

Beatrice78 wrote: »

Thank you so much for your reply, I really do appreciate it. I understand all your points except 'my annual allowance' Is this the 10k you can earn before paying tax? I earn more than this at work.
Thank you!

you have a cgt allowance (quite separate from your income tax allowance ) of 11,000

however, I'm not sure if the acquisition cost is that of the value at the time your mother transferred ownership to you, as you and your mother would be 'connected persons' for cgt purposes

uknick

CLAPTON wrote: »

you have a cgt allowance (quite separate from your income tax allowance ) of 11,000

however, I'm not sure if the acquisition cost is that of the value at the time your mother transferred ownership to you, as you and your mother would be 'connected persons' for cgt purposes

Good point. I should have said it will be "market" value at time of transfer.

silvercar

uknick wrote: »

Good point. I should have said it will be "market" value at time of transfer.

....the market value of a house with a granny living in it rent free and the right to do so for her life time, as opposed to the market value of a house that is empty.

Beatrice78

So I can minus the costs involved with selling the property,
money I've spent on the property I have already offset against the rent on my tax return
I can take off my allowance of £11k capital gains
I can minus the fee involved with transferring the property to me 20 years ago, if I can find record
Minus what the house would have been worth 20yrs ago - is this correct as I think the market value of a house with my gran living in it until she died would be 0? Sorry some of the replies confused me.
And what's left I have to pay 18% of?

I really do appreciate your help with this.

Becky

CLAPTON

Beatrice78 wrote: »

So I can minus the costs involved with selling the property,
money I've spent on the property I have already offset against the rent on my tax return
I can take off my allowance of £11k capital gains
I can minus the fee involved with transferring the property to me 20 years ago, if I can find record
Minus what the house would have been worth 20yrs ago - is this correct as I think the market value of a house with my gran living in it until she died would be 0? Sorry some of the replies confused me.
And what's left I have to pay 18% of?

I really do appreciate your help with this.

Becky

the value of the house would be lower than if it was empty but not zero


whether you pay 18% or 28% depends upon the details

example

suppose your normal income is say 30,000 for this tax year

and you when make a capital gain of 50,000

the the tax will be as follows

tax at 18% on 41,865 - 30,000 ie. 18% of 11,865 = 2,135.70

plus tax at 28% on 50,000 - 11,865 i.e. 28% of 38,156 = 10,677.80

so total tax = 12,813.50

twig1_2

As the cost is a deduction from the proceeds to calculate tax you don't want it to be zero anyway. Want it to be high.

Beatrice78 wrote: »

So I can minus the costs involved with selling the property,
money I've spent on the property I have already offset against the rent on my tax return
I can take off my allowance of £11k capital gains
I can minus the fee involved with transferring the property to me 20 years ago, if I can find record
Minus what the house would have been worth 20yrs ago - is this correct as I think the market value of a house with my gran living in it until she died would be 0? Sorry some of the replies confused me.
And what's left I have to pay 18% of?

I really do appreciate your help with this.

Becky

uknick

I assume your mother transferred the property correctly notifying the Land Registry of the change of owner. Therefore, one would have thought the value declared on the land transfer form TR1, or whatever it was called 20 years ago, would be adequate for tax purposes.

CLAPTON

uknick wrote: »

I assume your mother transferred the property correctly notifying the Land Registry of the change of owner. Therefore, one would have thought the value declared on the land transfer form TR1, or whatever it was called 20 years ago, would be adequate for tax purposes.

that would be incorrect