Best way to transfer property: gift or sale

KhalA

Hi
A mother-in-law would like to give her property (main residence) to her daughter-in-law (because son is a higher tax payer). 

Is the best way to do this by way of gift or sale?

The property is worth £65,000, was bought 30 years ago for £25K. 

If it was her main residence (she lives elsewhere now), I don't think she will have to pay CGT if it is gifted?

But are there any tax implications for daughter in law if she receives it as gift? It is daughter in law's first home, but she might let it out in the future. 

They want to do transfer themselves and not pay solicitors, as the value of property is low.

Or is it better to sell the house for market value and not gift it?

Thanks

user1977

KhalA said:

Hi
A mother-in-law would like to give her property (main residence) to her daughter-in-law (because son is a higher tax payer). 

If it was her main residence (she lives elsewhere now), I don't think she will have to pay CGT if it is gifted?

Which is correct?

And where does daughter-in-law live?

propertyrental

KhalA said:

Hi
A mother-in-law would like to give her property (main residence) to her daughter-in-law (because son is a higher tax payer). 

Is the best way to do this by way of gift or sale?

The property is worth £65,000, was bought 30 years ago for £25K. 

If it was her main residence (she lives elsewhere now), I don't think she will have to pay CGT if it is gifted?

But are there any tax implications for daughter in law if she receives it as gift? It is daughter in law's first home, but she might let it out in the future. 

They want to do transfer themselves and not pay solicitors, as the value of property is low.

Or is it better to sell the house for market value and not gift it?

Thanks

* so MIL no longer live there? Not her main residence?
* how long since it was her main residence?
* where does MIL live now?
* who lives in the property now? Or is it empty? Whose main residence is it now?
*Does MIL want money in return for the property? If not, has she sufficient funds for current/future life?
* Might she need care in future? Gifting the property (or selling below market value) could constitute 'deprivation of assets' if she claimed care costs from the local authority..
* Gifts are not taxed, unless the donor dies within 7 years in which case Inheritance tax might be due.

There are other potential complexities and MIL might do well to get inheritance/tax advice. Has se written a will?

phillw

KhalA said:

If it was her main residence (she lives elsewhere now), I don't think she will have to pay CGT if it is gifted?

Any CGT due on a gift to a close family member will be based on the market rate of the property.

If they have moved to another property in the last two years then they can nominate the gifted property as their main residence. If it's longer, then any CGT due will depend on how long it's not been their main residence. You don't pay CGT on the first £6000

https://www.gov.uk/tax-sell-home/let-out-part-of-home

Even if you move into rented accommodation (or any other property that you don't own), then that could still become your main residence. You can notify HMRC which property you wish to be your main residence for CGT purposes, otherwise they will base it on where you live.

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/capital-gains-tax/selling-your-home

KhalA

user1977 said:

KhalA said:

Hi
A mother-in-law would like to give her property (main residence) to her daughter-in-law (because son is a higher tax payer). 

If it was her main residence (she lives elsewhere now), I don't think she will have to pay CGT if it is gifted?

Which is correct?

And where does daughter-in-law live?

The mother lives with her son in his property now. 

The daughter in law lives in her husband's property. 

KhalA

* so MIL no longer live there? Not her main residence?
no, she has just moved in with her other son.

* how long since it was her main residence?
she has lived in property on and off. She is still paying bills etc

* where does MIL live now?
other son. 

* who lives in the property now? Or is it empty? Whose main residence is it now?
It's empty. Son & daughter-in-law are renovating it. They may or may not live in it.  

*Does MIL want money in return for the property? If not, has she sufficient funds for current/future life?
No, the property was always the son's. He paid it off when he started working, but off but was too young to have in his name when it was purchased. 


* Might she need care in future? Gifting the property (or selling below market value) could constitute 'deprivation of assets' if she claimed case costs from the local authority..
No she is not ill.

* Gifts are not taxed, unless the donor dies within 7 years in which case Inheritance tax might be due.
That's what I thought- thank you


There are other potential complexities and MIL might do well to get inheritance/tax advice. Has se written a will?
Yes- she has got tax advice and she want to dispose of this property to avoid tax in future. 

phillw

propertyrental said:
* Gifts are not taxed

Gifts of property to close family members are taxed at the market value.

KhalA

phillw said:

KhalA said:

If it was her main residence (she lives elsewhere now), I don't think she will have to pay CGT if it is gifted?

Any CGT due on a gift to a close family member will be based on the market rate of the property.

If they have moved to another property in the last two years then they can nominate the gifted property as their main residence. If it's longer, then any CGT due will depend on how long it's not been their main residence. You don't pay CGT on the first £6000



Even if you move into rented accommodation (or any other property that you don't own), then that could still become your main residence. You can notify HMRC which property you wish to be your main residence for CGT purposes, otherwise they will base it on where you live.

Any CGT due on a gift to a close family member will be based on the market rate of the property.
The full market value is declared on the transfer form.


The property was the main residence because she was living on and off and now wants to move in full-time with other son. 

The article you sent states that "If you have more than one property that could qualify as a ‘residence’ at the same time, you should seek advice about whether a main residence nomination should be made based on your circumstances."

So I'm not sure if she should make the main residence nomination. When the property is transferred, will HMRC check this?
Should she submit a tax return when the property is transferred?

Will it be better to transfer the property for monetary value? 

Thank you for your help