Buying a house from parents

Smth

Hello

My parents bought a house a few years ago. They bought it outright so there’s no mortgage. I’ve been living there for a while. We now have inheritance money in the family and my dad has offered to give me the house so I have somewhere with no mortgage. Using my inheritance money, I’m going to buy the house off them for the amount they paid for it.

Obviously I’m assuming it’s a relatively straightforward process, but I know I’ll have to go through a solicitors and get the paperwork signed. As I haven’t bought property before, I’m a little unsure about the process and how much it should cost in solicitor fees.

If anyone has any advice or information that would be greatly appreciated.

Thank you!

AnotherJoe

The main issue will be capital gains tax.
As they are selling to a "connected person" and they have not been living there (I think, from what you've written?) the sale is treated as though they sold it to you at market price.
So lets say they bought it for £50k and its now worth £450k and they sell it to you for £50k. That is treated as if they sold it for £450k (even if just £50k changes hands) which means £400k capital gains (minus various allowances for time they lived there, if any, and so on)
That could be a fair chunk of money. Maybe £100k in tax or so? You probably need to see a specialist to explore ways to minimise that. It be simpler if it stays in the family and is left to you when they die, when CGT is extinguished. Though there may be inheritance to to pay. Again, you need a specialist.


p.s. of course my numbers may be way off. If they bought it for £100k and are selling to you for £120k not really an issue)

macman

OP, you need to post the date of purchase, price paid, and current value. And the period they lived there.

Smth

Thanks for the replies.

They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
They haven’t lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. They’ve already paid inheritance tax on my grandparent’s trust so there’s not loads left.

p00hsticks

Smth wrote: »

my dad has offered to give me the house so I have somewhere with no mortgage. Using my inheritance money, I’m going to buy the house off them for the amount they paid for it.

Smth wrote: »

They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.

So your father isn't actually giving you anything, other than the option to buy the property for (possibly slightly more than) the current market value ?

AnotherJoe

Smth wrote: »

Thanks for the replies.

They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
They haven’t lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. They’ve already paid inheritance tax on my grandparent’s trust so there’s not loads left.

What? Why would you pay more than ist worth?!!!!

middleclassbutpoor

Smth wrote: »

Thanks for the replies.

They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
They haven’t lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. They’ve already paid inheritance tax on my grandparent’s trust so there’s not loads left.

A financial adviser should have considered the capital gain of the asset and done all the calcs to determine that was the best route with the full knowledge of your parents circumstances.

getmore4less

If same price or less no CGT.

I would be sceptical about the IHT situation as well.

Passing your inheritance back upto your parents just gives them more money to be paying IHT on if they die.

Keep_pedalling

Smth wrote: »

Thanks for the replies.

They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
They haven’t lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. They’ve already paid inheritance tax on my grandparent’s trust so there’s not loads left.

That makes no sense. If you pay him for the house and he dies in the next 7 years unless he blows the lot his estate will just have a lot of extra cash to pay tax on instead of a gifted house, and will still have to pay it if he lives for 7 years or more.

The better option would be for him to gift you the property, and take out term insurance to cover the IHT that an early death might bring.

I think he needs a new financial advisor.

middleclassbutpoor

I would also get a written valuation at any point you take ownership in case the HMRC question this at a later date.

This valuation should be an independent RICS valuation so there can be no feeling of have you sold/bought below market value or at least 3 different EA's.