No will - inheritance to be gifted - tax implications

Keep_pedalling

Robert_McGeddon said:

HeWhoDares said:

Couple of responses to the above:
 - my father has no significant savings
 - the ownership transfer wasn't to do with care-homes, much more complicated than that I'm afraid
 - the house was bought for £100k but there is still £50k mortgage on the property, hence value of £200k but only getting £150k for it.

One other quick one...
The house was bought for £100k, so overall profit would be £100k.
So what would I pay the CGT on?  I assume the profit (£100k)

Surely the gain is £(150-100)K, i.e. £50K?

No, the gain is £100k the OP deducted the outstanding mortgage which has caused some confusion.

Robert_McGeddon

Keep_pedalling said:

Robert_McGeddon said:

HeWhoDares said:

Couple of responses to the above:
 - my father has no significant savings
 - the ownership transfer wasn't to do with care-homes, much more complicated than that I'm afraid
 - the house was bought for £100k but there is still £50k mortgage on the property, hence value of £200k but only getting £150k for it.

One other quick one...
The house was bought for £100k, so overall profit would be £100k.
So what would I pay the CGT on?  I assume the profit (£100k)

Surely the gain is £(150-100)K, i.e. £50K?

No, the gain is £100k the OP deducted the outstanding mortgage which has caused some confusion.

It certainly has!  I still read the net proceeds as being the £200K the house is worth less £50K outstanding mortgage, so £150K. Gain is this £150K less £100K cost, i.e. £50K.  Perhaps the OP could clarify?

Also remember to embed purchasing, selling and capital improvement costs in the calculation.

Keep_pedalling

Robert_McGeddon said:

Keep_pedalling said:

Robert_McGeddon said:

HeWhoDares said:

Couple of responses to the above:
 - my father has no significant savings
 - the ownership transfer wasn't to do with care-homes, much more complicated than that I'm afraid
 - the house was bought for £100k but there is still £50k mortgage on the property, hence value of £200k but only getting £150k for it.

One other quick one...
The house was bought for £100k, so overall profit would be £100k.
So what would I pay the CGT on?  I assume the profit (£100k)

Surely the gain is £(150-100)K, i.e. £50K?

No, the gain is £100k the OP deducted the outstanding mortgage which has caused some confusion.

It certainly has!  I still read the net proceeds as being the £200K the house is worth less £50K outstanding mortgage, so £150K. Gain is this £150K less £100K cost, i.e. £50K.  Perhaps the OP could clarify?

Also remember to embed purchasing, selling and capital improvement costs in the calculation.

The mortgage does not get deducted from the gain.

HeWhoDares

The original cost of the house was £100k.  There was a £50k deposit and a mortgage of £50k.  The house is now worth £200k.
There mortgage has always been interest only, so the mortgage remains at £50k.   

lr1277

HeWhoDares said:

The original cost of the house was £100k.  There was a £50k deposit and a mortgage of £50k.  The house is now worth £200k.
There mortgage has always been interest only, so the mortgage remains at £50k.   

So 100k profit will put you into the higher bands for both income tax and CGT. So you will be paying 28% tax on the profit. I can't advise on your income tax band as you have not stated your income.

lr1277

Having re-read your original post, here are my thoughts.
You would effectively have £150k after the sale of the property and paying off the £50k mortgage.
Then you can subtract the £12k allowance, meaning you would pay 28% on £138k which is  £38640. This leaves you with £111360 (£150k - £38640).
You will then split the £111360 between 4 people so I reckon you will each get £27840.
You would pay the tax as it is your property.
HTH.

Thrugelmir

lr1277 said:

Having re-read your original post, here are my thoughts.
You would effectively have £150k after the sale of the property and paying off the £50k mortgage.
Then you can subtract the £12k allowance, meaning you would pay 28% on £138k which is  £38640. This leaves you with £111360 (£150k - £38640).
You will then split the £111360 between 4 people so I reckon you will each get £27840.
You would pay the tax as it is your property.
HTH.

The original purchase price was a £100k of which £50k was funded by a mortgage. Gross gain (before costs incurred in disposal) are therefore a £100k. 

lr1277

Thrugelmir said:

lr1277 said:

Having re-read your original post, here are my thoughts.
You would effectively have £150k after the sale of the property and paying off the £50k mortgage.
Then you can subtract the £12k allowance, meaning you would pay 28% on £138k which is  £38640. This leaves you with £111360 (£150k - £38640).
You will then split the £111360 between 4 people so I reckon you will each get £27840.
You would pay the tax as it is your property.
HTH.

The original purchase price was a £100k of which £50k was funded by a mortgage. Gross gain (before costs incurred in disposal) are therefore a £100k. 

Thanks. I confused myself. My revised suggestion is:

You would effectively have £150k after the sale of the property and paying off the £50k mortgage.
Then you can subtract the £12k allowance from the £100k profit, meaning you would pay 28% on £88k which is  £24640. This leaves you with £125360 (£150k - £24640).
You will then split the £125360 between 4 people so I reckon you will each get £31340.
You would pay the tax as it is your property.
HTH.

Robert_McGeddon

Keep_pedalling said:

The mortgage does not get deducted from the gain.

Doh!  You're right of course. Brainfreeze on my part.

getmore4less

HeWhoDares said:

The original cost of the house was £100k.  There was a £50k deposit and a mortgage of £50k.  The house is now worth £200k.
There mortgage has always been interest only, so the mortgage remains at £50k.   

if its your house its should be your mortgage, you can't gift a house with a mortgage.

What is not clear is who bought the house and what sort of gift.


What rent has been paid  needs to be full market not just enough to cover the IO mortgage.



Although unlikely there is any IHT for dad there is potential for a GWR or pre-owed asset tax depending on how this was structured.

f you end up needing to do a IHT return it can be important to get that correct.

IT may be that a grant and IHT return won't be needed