CGT on Property Gift from Parents - Need help to calculate

tpritchard

Hi all,

My parents own and currently live in a property that they bought in 1987 for £45k. The property is worth £95k at today's market price. They have not always lived there, and rented it out privately between 1987 - 2013. During that time, they lived elsewhere (renting, not a second home).

They would now like to gift the property to my sister and I, essentially transferring the ownership to us. The reason for this is that they would like to move house to somewhere more suitable as they get older (my Dad is retired), and they will not be able to get a mortgage, whereas my sister and I would be able to get one. We therefore would intend to sell the property to fund a purchase after we received ownership.

I am aware that my parents would be liable to pay Capital Gains Tax (via self-assessment) if they gift the property, but I am struggling to calculate the total they would be liable for, so I'm looking for some assistance with the calculation. This will help us to plan how much tax we will need to pay.

I know that CGT is payable on the gain, so in this case it would be £95,000 (market value) - £45,000 (purchase price) = £50,000, but I am not sure how to take into account the income exemption of £11,100 for 2015/16 in terms of the property being jointly owned. Is CGT calculated on an individual basis? If so, does that mean that we should calculate it as a gain of £25,000 per parent, assuming that the joint ownership of the property means a 50/50 split of the capital gain?

I should add that my father's other income for the tax year is from pension only (not sure exactly how much but I could find out), and that my mother works part-time and earns around £10k per annum.

Any help getting the calculation correct would be greatly appreciated please!

booksurr

tpritchard wrote: »

Hi all,

My parents own and currently live in a property that they bought in 1987 for £45k. The property is worth £95k at today's market price. They have not always lived there, and rented it out privately between 1987 - 2013. During that time, they lived elsewhere (renting, not a second home).

They would now like to gift the property to my sister and I, essentially transferring the ownership to us. The reason for this is that they would like to move house to somewhere more suitable as they get older (my Dad is retired), and they will not be able to get a mortgage, whereas my sister and I would be able to get one. We therefore would intend to sell the property to fund a purchase after we received ownership.

I am aware that my parents would be liable to pay Capital Gains Tax (via self-assessment) if they gift the property, but I am struggling to calculate the total they would be liable for, so I'm looking for some assistance with the calculation. This will help us to plan how much tax we will need to pay.

I know that CGT is payable on the gain, so in this case it would be £95,000 (market value) - £45,000 (purchase price) = £50,000, but I am not sure how to take into account the income exemption of £11,100 for 2015/16 in terms of the property being jointly owned. Is CGT calculated on an individual basis? If so, does that mean that we should calculate it as a gain of £25,000 per parent, assuming that the joint ownership of the property means a 50/50 split of the capital gain?

I should add that my father's other income for the tax year is from pension only (not sure exactly how much but I could find out), and that my mother works part-time and earns around £10k per annum.

Any help getting the calculation correct would be greatly appreciated please!

CGT is per owner, so the gain is 25k father and 25K mother assuming it is 50/50 ownership. Obviously they can also deduct buying costs from that as well

each person is then entitled to claim private residence relief and letting relief as well as each getting their own personal allowance.

with the modest values you are talking about it's probable neither will have any taxable gain left

see here for a worked example of the 5 steps involved in the calculation...
http://forums.moneysavingexpert.com/showpost.php?p=69071134&postcount=6

work out their numbers then post them up if you want one of us to check your understanding and accuracy

CLAPTON

if you get stuck we can help with the calculation

but why don't you parents simply sell the property themselves rather than gift it to you?