gifting house to sibling

mrbennbenn

In 2016 I purchased a house with my brother and sister for £250k. We intended to rent it out but in the end my brother moved in to live - rent free. The house was purchased outright with no mortgage. Now, a year later my brother has announced he is getting married and my sister and I wish to give him our shares of the house (house owned by the three of us equally) as a wedding present. We will not charge him and do not want any money to change hands. Equally we do not want to find ourselves with any tax liability. If it means anything, we just had the house valued and it is now £270k. Are we able to just sign over the house or will there be CGT due? Thanks for any input.

Slithery

No CGT should be due, not sure about SDLT for your brother.

xylophone

http://www.telegraph.co.uk/tax/capital-gains/do-i-have-to-pay-tax-when-i-give-away-a-property/

[Deleted User]

Lucky Brother :T

mrbennbenn

Thanks for your responses. As I understand it, SDLT is due when there is a financial transaction taking place, either if he was paying us or there was a mortgage still outstanding.

I'm happy there is no CGT, but are you able to confirm why that would be? As from other articles I've read (and maybe mis-read) it seems that there is a 'beneficial value' to him receiving which should be assessed at marketed value as we count as 'connected '... again I might have just ended up confused by all the articles I've been reading.

Thanks for any additional comments and clarity.

agrinnall

No CGT because the capital gain is £20K, of which your share is 1/3 or £6,666, which is below your annual CGT allowance (unless you have other capital gains in the year that would take you above it - for 2017-8 it's £11,300).

xylophone

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

Re CGT, the total gain is £20,000 - your share is 1/3 of that.

https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

gingercordial

mrbennbenn wrote: »

Thanks for your responses. As I understand it, SDLT is due when there is a financial transaction taking place, either if he was paying us or there was a mortgage still outstanding.

I'm happy there is no CGT, but are you able to confirm why that would be? As from other articles I've read (and maybe mis-read) it seems that there is a 'beneficial value' to him receiving which should be assessed at marketed value as we count as 'connected '... again I might have just ended up confused by all the articles I've been reading.

Thanks for any additional comments and clarity.

You are correct that the disposal proceeds for your capital gain calculation must be the market value because he is your relative.

However you've said you've had it valued recently at £270k, and you paid £250k for it, so the total gain is £20k. You then each only pay tax on your share, ie a third of that. As others have said, that's below your CGT allowance for the year provided that you have no other gains that are already using it up.

Keep_pedalling

The only tax issue here is IHT, and then only if you die within 7 years, as the gift remains as part of your estate for that period less up to £6,000 for 2 years of your £3000 annual gift allowance.