Gifting money from selling a property

maggiesoup

Hi all,  I've got half a share of a small flat and I'm going to sell it to give the money to my son to help him on to the property ladder.  For tax purposes, is this viewed as "income" even if I can prove (through an official Confirmation of Gift letter to lenders) that I gave him the money for that reason?     I'm worried that it would put in higher tax bracket or would I have to speak to an adviser about Inheritance?  Help!

user1977

No, Income Tax is only payable on specific things - salary, profit from business, investment interest/dividends. Not gifts.

From your point of view, the gift may be deemed to be part of your estate for Inheritance Tax purposes if you die within 7 years of making the gift. Though that's no worse than you not gifting it and you still owning it when you die.

maggiesoup

Thanks.  Just been advised that I'll probably be due Capital Gains Tax though.  There seems to be no incentive to work hard and put money into something for your retirement or to benefit your children. 

user1977

maggiesoup said:

Just been advised that I'll probably be due Capital Gains Tax though.  There seems to be no incentive to work hard and put money into something for your retirement or to benefit your children. 

You don't think keeping at least 72% of the gain is enough?

diystarter7

maggiesoup said:

Thanks.  Just been advised that I'll probably be due Capital Gains Tax though.  There seems to be no incentive to work hard and put money into something for your retirement or to benefit your children. 

Yep, possibly CGT depends on the profit after costs on your share.
Totally agree re no incentive to spend wisely/etc and this is why we gave away a property and equal amounts of money to our two other kids  becuse of IHT etc, etc and like most good children they did not want the money/property but as expected have invested it and increased in value with their bTL's etc.

km1500

yes if a second residence you pay 28% cgt on your profits but you do currently have a 12,300 allowance and can take off expenses eg buying and selling costs.

lookstraightahead

maggiesoup said:

Thanks.  Just been advised that I'll probably be due Capital Gains Tax though.  There seems to be no incentive to work hard and put money into something for your retirement or to benefit your children. 

It gives you choice.

I'm assuming should you need care there won't be a deprivation of assets issue? 

diystarter7

user1977 said:

maggiesoup said:

Just been advised that I'll probably be due Capital Gains Tax though.  There seems to be no incentive to work hard and put money into something for your retirement or to benefit your children. 

You don't think keeping at least 72% of the gain is enough?

And what if the price had crashed when it was bought and had to sell at a loss. Would the government have paid him to make up the loss, I doubt it. Its tax on tax and tax then care home fees if you need to go into one and then the final insult for many that have worked all of their lives and spent prudently and saved wisely is the IHT.

getmore4less

Depends what you bought it for.

Selling half will limit your potential buyers.

lookstraightahead

diystarter7 said:

user1977 said:

maggiesoup said:

Just been advised that I'll probably be due Capital Gains Tax though.  There seems to be no incentive to work hard and put money into something for your retirement or to benefit your children. 

You don't think keeping at least 72% of the gain is enough?

And what if the price had crashed when it was bought and had to sell at a loss. Would the government have paid him to make up the loss, I doubt it. Its tax on tax and tax then care home fees if you need to go into one and then the final insult for many that have worked all of their lives and spent prudently and saved wisely is the IHT.

Usually the profit made on a house is nothing to do with working hard. People who rent work just as hard.

and if you end up with no money (eg you sell the house you've been living in at a loss)  the government will pay for your care home fees, so you can't lose. 

Brie

If you gift a large sum there's also the potential it will be considered deprivation of assets should you ever need assistance from the local council for your care.  People who have spare money think it might not be relevant but you should be prepared in case of a dramatic change of circumstances.  Basically the council could, quite legally, consider your child should pay for your care.