Buying a second home & CGT

TonkaTom

Currently I have a house with a mortgage. The house is probably worth 300k and I have £140k mortgage.

I want to help my girlfriend buy her flat. I will kick in about £150k cash from my pension lump sum.

We will be buying it as Tenants in Common. She will own 34% and I will own 66%.

I will be leaving my house and my share of this flat to my children in my will but I expect my girlfriend will out live me so they will be able to sell the house straight away but will have to wait a while before they can get their hands on my share of the flat.

My question is simple. Will they be libel for CGT and will this be due when I die or when the flat is sold?

pyueck

Yes, when it is sold you will be liable to CGT on your share. If your children inherent 66% of the house and she is living in there I see that this could create problems.

This sounds like a potentially risky plan. What are you planning to retire on or pay the rest of your mortgage off with? Have you a plan of what you would do if you split up, I know probably not what you want to hear but this plan could leave you exposed.

TonkaTom

I understood as Tenants in Common my children couldn't force the sale of the flat without the agreement of the other tenant.

I'm very lucky in that I will have a very good pension so I will be okay for cash even if we split up. I wouldn't want to make my girlfriend homeless even if she were my ex-girlfriend!

Do I get a yearly allowance for the CGT which builds up over the years?

booksurr

when you die your children will inherit 66% of the flat. You (ie your estate) will not be exposed to CGT, there is no CGT on death. That is why there is inheritance tax instead!

However, yes your children will be. The flat is not their main home so when/if your girlfriend ever leaves it and it is sold your children will pay CGT on the increase in value between the date they became owners (your death) and what it sells for.

CGT allowances are not cumulative, it is one allowance for the year of sale.

you should not worry about CGT as it has no impact at all on your plans given you are not intending to ever sell the place in your name and when your children sell it you will be dead and they can pay the tax from the proceeds of the sale bearing in mind that could be a very long time after your death.

Mattygroves2

TonkaTom wrote: »

I understood as Tenants in Common my children couldn't force the sale of the flat without the agreement of the other tenant.

Yes they would be able to force a sale when they inherit unless you make provision in your will for your girlfriend to have a life interest.

TonkaTom

Mattygroves2 wrote: »

Yes they would be able to force a sale when they inherit unless you make provision in your will for your girlfriend to have a life interest.

Thank you for that advice.