Brother gifting property to younger disabled brother (no mortgage)

Papermonkey

I am a disabled person who is currently on PIP, Income Related ESA, Disabilty Premium and Housing Benefit. I am waiting to go onto Universal Credit and very worried that I will be struggling financially.
With the significant probability of rent arrears and hardship/poverty under Universal Credit, my brother has suggested to cash buy and gift me a small property. This property is to be owned and lived in by myself as my first home. theoretically It is a cash purchase of around £40-£50k. (I live up north and prices are getting cheaper)

What are the tax implications of my brother gifting me a property with no mortgage? I think there is no stamp duty If there is no mortgage. Also I do not think there would be Capital Gains Tax unless the property has gone up by more than around say £12k.
Does inheritance tax or any other tax need to be paid?

Any sound advice in these matters would be of great help.

Bossypants

Does your brother already own the property in question, or would he be buying it now to gift to you? If the latter, it would be far simpler for him to just gift you the cash and you buy the property directly. There are no tax implications on him making you such a gift, so long as he survives for 7 years after making it (if not the gift will come under inheritance tax rules).

Mortgages have nothing to do with stamp duty, however stamp duty isn't payable on purchases of less than £125,000, so no issue there.

G_M

Capital Gains Tax - None if it is you main home.


SDLT - none if you buy it and it's the only property you own


SDLT - if your brother buys it and already owns a property, SDLT would be payable.


Inheritance Tax - if your brother died within 7 years, the gift would be included in his Estate (though at a reducing amount as the years pass).

CarrieVS

Bossypants wrote: »

Mortgages have nothing to do with stamp duty, however stamp duty isn't payable on purchases of less than £125,000, so no issue there.

To be completely accurate, stamp duty is only payable below £125,000 if the purchase results in the buyer owning more than one property and the property is not replacing their main home.

I.e. if OP's brother were to buy it under these circumstances, he would pay stamp duty. Gifting the money for the purchase gets around that.

Owain_Moneysaver

Papermonkey wrote: »

With the significant probability of rent arrears and hardship/poverty under Universal Credit, my brother has suggested to cash buy and gift me a small property.

Any sound advice in these matters would be of great help.

Will to be able to manage the expenses and maintenance of owning your own property, especially unexpected bills that crop up?

Keep_pedalling

G_M wrote: »

Capital Gains Tax - None if it is you main home.


SDLT - none if you buy it and it's the only property you own


SDLT - if your brother buys it and already owns a property, SDLT would be payable.


Inheritance Tax - if your brother died within 7 years, the gift would be included in his Estate (though at a reducing amount as the years pass).

On your last point taper releif only applies to gifts over the nil rate band so those reducing rates dont apply.

The OP does not really need to worry about this there will be no claw back on him should anything happen to his brother with this level of gifting.

Sounds like the OP has a great brother :cool:

Papermonkey

Hi all.

Good to see so many helpful replies. Thank you

So this would be far less complicated If my brother gifts me the money to buy the home?
Would my brother pay for the property from his bank account and then I have the property placed in my name ?

Or would my brother have to gift the money and put it into my bank account first and then I buy the property ? - this option would be a problem as I will suddenly have money over 16k and this will cut off my benefits.

If someone can explain this, I would be very grateful.

Thanks

glennevis

When I gifted (just a deposit, as it happens) the money remained in my bank account until it was transferred to the solicitor handling the purchase. I also had to sign a document stating this was a gift.

Keep_pedalling

I would think the best option, is that your brother pays the money to your solisitor at the appropriate point in the purchase.

AnotherJoe

Papermonkey wrote: »

Hi all.

Good to see so many helpful replies. Thank you

So this would be far less complicated If my brother gifts me the money to buy the home?
Would my brother pay for the property from his bank account and then I have the property placed in my name ?

Or would my brother have to gift the money and put it into my bank account first and then I buy the property ? - this option would be a problem as I will suddenly have money over 16k and this will cut off my benefits.

If someone can explain this, I would be very grateful.

Thanks

I think a third option would be better. You buy it, the money goes direct from your brother to solicitor. Solicitor needs to know this upfront so the appropriate checks can be done.
That way you never have that money appear in your bank account and no extra SDLT needs to be paid.

davidmcn

I would check whether this still complies with means testing for benefits purposes - even if it's going direct from brother to OP's solicitor, it's still the OP's money as soon as it hits their solicitor's client account.