How much tax to pay when selling a rental property

funnymonkey

Can anyone please help me
My mother has a rental property that she lived in until 10 years ago and now rents out.
She wishes to gift aid the property to me (not sure if this could be done) or if she sells the property to me at a reduced rate what % of tax would she need to pay in tax?
Thank you

KRB2725

Does the property have a mortgage and what do you mean by gift aid it to you, do you mean give it to you?

Cakeguts

As I understand it capital gains tax is based on a market price valuation not on how little she sell it to you for. Where does she live now? Has she got another property that she owns and lives in?

funnymonkey

She lives on a caravan park as she much prefers it there as there's many retirees there she has made friends with

00ec25

on the basis the property was once her main/only home and that for the last 10 years it has not had that status because it was let, then if you want to know the real answer please provide the following:

1. where did she move to, ie did she buy another home where she has lived since then, or did she move from that property into a full time residential care home?
2. date of original purchase
3. original purchase cost (what she paid, not what the mortgage was)
4. date she moved out, ie when it ceased to be her main home. That may be a little earlier than the date tenants moved in, particularly if there was an overlap caused by her moving into her current home (assuming she owns where she currently lives)
5. what the property would be worth now if sold on the open market to a stranger
6. what is her total income for the current year (this directly drives how much CGT she pays at 18% and how much she pays at 28%)

unless you answer the above questions you will just waste everyone's time replying as they cannot give a meaningful answer without those figures.

also note:
1. you are not a registered charity therefore she cannot "gift aid" it
2, you and your mother are, in tax terms, "connected persons" therefore as she is liable to Capital gains tax on the disposal of a property which has not been her only home for the entire time she owned it she must calculate her gain using current market value, not a discounted price that you pay her
3. if you pay her less that full market value, including if she gifts it to you for free, then it will affect her inheritance tax position and may also impact her ability to claim means tested care home costs in the future as it would be "deprivation of capital"

G_M

funnymonkey wrote: »

Can anyone please help me
....if she sells the property to me at a reduced rate what % of tax would she need to pay in tax?
Thank you

I will be happy to answer the question you ask, once you have provided the information requested by 00ec25 above.

PhilE

funnymonkey wrote: »

Can anyone please help me
My mother has a rental property that she lived in until 10 years ago and now rents out.
She wishes to gift aid the property to me (not sure if this could be done) or if she sells the property to me at a reduced rate what % of tax would she need to pay in tax?
Thank you

You don't get charged Capital Gains for the time you've lived in a property as your only place of residence. You get charged CG for the time you've rented.
In this case its a mixed use, so she would pay CGT for the time she rented out the property. This still applies if she gifts you the property or sells it to you at a reduced rate, the tax would be based on the market value of the property.

If she gifts the property to you, Inheritance Tax gets cancelled after 7 years of the gift being made, with a sliding scale in the meantime. If she were to decide to live in the property again after giving it to you, its then regarded as a 'gift with reservation of benefit,' and subject to the full inheritance tax rate, unless she rents from you at the going market rate.
Whether your mums estate would be liable for IHT depends on the value of the estate. So IHT may or may not be a consideration.

Also, you couldn't buy your mums house at a reduced rate and escape IHT. The taxman would view the house as market value, so to avoid IHT you'd have to purchase the house at market value. Chat to a solicitor about this to confirm.

Stamp Duty will only apply to the gift if there is a mortgage attached to it, which the receiver of the gifted property would have to pay for.

And of course, if the property is still being rented you pay income tax on the rent.

00ec25

OP, do you want to know the answer or not? I see you have posted on other threads since this one yet appear not to have returned here?

funnymonkey

Thank you very much for your replies...looking at a different possibility now.
Much apprecited

Keep_pedalling

If this is your mother's only major asset, she would silly to give it away.

rmltcob

Hi - Q re CGT.

I brought a 2nd property in May 2006 for £197,500 and its been rented out for c.90% of the time since then. I now want to sell it, likely value is £365,000 as is, more with renovations/improvements.

During this entire period ive been below min tax threshold, and never made any CGT claims.

Maintenance, improvements and purchase/sale/agents/solicitors fees are likely c.£20,000 over 11 years.

What might my CGT liability be if I sell now, or if consider additional renovations/improvments before sale pls?

Any other suggestions to limit CGT liability?

Cheers