Capital Gains Tax questions

GemQuin

Hello,

If my mum gifts me her property while she is alive will we have to pay CGT twice? Once when she 'disposes' of it to me and then again when I sell it? (unless I make it my main home, which I will).

It is the only property in her name but she doesn't live in it - we do already. So could she claim Private Residence Relief?

Wondering if this CGT bill will outweigh any benefit in reducing IHT?

Thanks in advance.
G

xylophone

Has she ever lived in it?

Do you own any other property?

[Deleted User]

GemQuin wrote: »

Hello,

If my mum gifts me her property while she is alive will we have to pay CGT twice? Once when she 'disposes' of it to me and then again when I sell it? (unless I make it my main home, which I will).

It is the only property in her name but she doesn't live in it - we do already. So could she claim Private Residence Relief?

Wondering if this CGT bill will outweigh any benefit in reducing IHT?

Thanks in advance.
G

We need considerably more information -did mum ever live in it and for how long? Have you lived in it since the transfer and for long? Give us a timeline and, perhaps, some figures. CGT has no bearing on inheritance tax and both could arise. What is the value of your mum's estate? Is Dad still alive?

GemQuin

Sorry for late reply I've been away.

Thanks for your responses. So basically my mum never lived in her house, I live in it with my 2 kids. It is mortgage free. We've lived here since it was bought in 2013. Was £385k. Now worth about £550k. My mum lives in my 1 bedroom house, bought in 2010 for £250k which is now worth £350k & has a mortgage on it if approx £160k. Dad not around and mum never married.

As far as I understand it there is no stamp duty due on gifted properties that are mortgage free. But, if my mum gives it to me but she has never lived there, she must pay CGT. Having said that she has no other property in her name.

Are there part gifting options?
Thanks again,
G

booksurr

so (mortgages are irrelevant) ...

Mother:

• has an estate worth at least 550k comprising a house + everything else she owns.
• The property has a gain of 165k
• No husband, so for IHT purposes has only one IHT allowance currently £325,000.
• Has never lived in the house so cannot claim it as her main residence exempt from either CGT or IHT

You

• own a 1 bed flat which you currently do not live in (did you ever?) which has a gain of 100k

CGT
mother has no claim to PRR so all she would get is her personal allowance of £11,100 leaving her with a 153,900 gain most of which would be taxed at the max rate of 28% so worst case she would pay £43,092 in CGT if she gifts the property to you
Having done so, as she does not live in it, it would not be part of her estate for IHT purposes, but if she ever did move into it (eg in old age you look after her there) she would fall foul of the POAT rules unless she paid you rent.

IHT
if mother has the cash to pay the CGT bill now it might be efficient for her to do so compared to her eventual IHT bill as that would be at least 550 - 325 = 225 x 40% = £90,000

all the above based on current tax rules ....