CGT on gifted house but continued to be main residence for some years after

spiritus

My mother gifted her house to me in 1997. I was living with her at the time and continued to do so until 2008 when I moved out and bought a house.

My mother continued to live there until recently.

How would CGT be calculated and how is the "market value" calculated?

Would the market value (for purposes of CGT) date back to 1997 or would it date back to 2008 (as between 1997 - 2008 the property was my main residence)?

Keep_pedalling

It is based on the gain from the value at the time of the gift, however you will be able to claim primary residence relief for the time you lived there plus the last 9 months of ownership. There is a calculator on the following link.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/disposal-date

The other tax issue is IHT, as this was a gift with reservation of benefit so the 7 year rule does not apply until she actually moved out of the house. The house does form part of her estate unless she lives for 7 years after moving out. Because the transfer was done before the introduction of the residential NRB that can’t be claimed by her estate unless she has subsequently purchased another home.

p00hsticks

I'm not an expert but I believe the calculation would start from when you acquired the house in 1997 and use the market value from then as a starting point - hopefully you have some sort of record of what that might be at the time ?

The CGT calculation will then make allowance for the number of months during the ownership period for which it was your PPR, so roughly I think something like this .....

( price now - price in 1997 ) x (number of months it was not your PPR / total number of months owned ) 

with allowances for buying and selling costs, an additional 9 months, and certain improvement expenses if any ....

Bookworm105

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) Therefore taxable period 16/27 = 59%

e) Amount subject to tax:  £gain x 59%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

saajan_12

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

I think you have this backwards.. it was not OP's main home for 16 years which is over half the period of ownership, so over half the gain is taxable. 
PPR applies for 11/27 = 41% of time, so tax is payable on the remaining 59% of the gain. 

Then OP would be able to deduct the 3k allowance (assuming rules don't change) 

spiritus

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

So....to plug some figures into that...

a) No idea what market value was in 1997. Houses on street not sold anywhere around that time but let's assume £ 75,000

b) I retained ownership after moving out in 2008 whilst my mum continued to reside there

c) I moved out in 2008-16 years ago

d) 41% taxable? I thought it was 18% or 20/24% on residential property?

e) House sold in 2024 for £ 163,000

Bookworm105

spiritus said:

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

So....to plug some figures into that...

a) No idea what market value was in 1997. Houses on street not sold anywhere around that time but let's assume £ 75,000

b) I retained ownership after moving out in 2008 whilst my mum continued to reside there

c) I moved out in 2008-16 years ago

d) 41% taxable? I thought it was 18% or 20/24% on residential property?

e) House sold in 2024 for £ 163,000

my mistake, 59% not 41% is the taxable period of ownership
gain 163,000 - 75,000 = 88,000
main residence relief is 41% so 88,000 x 41% = 36,080
Taxable gain 88,000 - 36,080 = 51,920

tax calculation:
Net taxable gain:  51,920 - CGT allowance (currently 3,000) = 48,920
Depending on how much of your taxable earnings and other income is less than the £37,700 tax threshold you would possibly pay some at 18% on the amount remaining between taxable income and 37,700, and you would pay the balance at 24%.
Best case scenario, you have zero income so 37,700 x 18% + (48,920-37,700) x 24% =  9,478.80 tax to pay
worst case scenario all at 24% 48,920 x 24% = 11,740.80 tax to pay 


you need a proper valuation at 1997 and you also need to deduct legal fees and EA costs from the 88,000 gain associated with the sale (clearly as it was a gift you have no costs associated with receiving in in 1997). The % calculation should be in months, not years.

important - you have 60 days from the date of completion of sale in which to declare your CGT calculation and pay over the tax or you will face penalties.

spiritus

Bookworm105 said:

spiritus said:

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

So....to plug some figures into that...

a) No idea what market value was in 1997. Houses on street not sold anywhere around that time but let's assume £ 75,000

b) I retained ownership after moving out in 2008 whilst my mum continued to reside there

c) I moved out in 2008-16 years ago

d) 41% taxable? I thought it was 18% or 20/24% on residential property?

e) House sold in 2024 for £ 163,000

my mistake, 59% not 41% is the taxable period of ownership
gain 163,000 - 75,000 = 88,000
main residence relief is 41% so 88,000 x 41% = 36,080
Taxable gain 88,000 - 36,080 = 51,920

tax calculation:
Net taxable gain:  51,920 - CGT allowance (currently 3,000) = 48,920
you would pay tax at 24% on most of that and possibly some at 18% depending on how much of your taxable earnings and other income is less than the £37,700 tax threshold 

you need a proper valuation at 1997 and you also need to deduct legal fees and EA costs from the 88,000 gain associated with the sale (clearly as it was a gift you have no costs associated with receiving in in 1997). The % calculation should be in months, not years.

important - you have 60 days from the date of completion of sale in which to declare your CGT calculation and pay over the tax or you will face penalties.

Thankyou. Regarding the CGT annual allowance....currently it stands at £ 3000 but am I right in understanding it was much higher in previous years? And would those historic annual allowances be calculated that way too?

Bookworm105

spiritus said:

Bookworm105 said:

spiritus said:

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

So....to plug some figures into that...

a) No idea what market value was in 1997. Houses on street not sold anywhere around that time but let's assume £ 75,000

b) I retained ownership after moving out in 2008 whilst my mum continued to reside there

c) I moved out in 2008-16 years ago

d) 41% taxable? I thought it was 18% or 20/24% on residential property?

e) House sold in 2024 for £ 163,000

my mistake, 59% not 41% is the taxable period of ownership
gain 163,000 - 75,000 = 88,000
main residence relief is 41% so 88,000 x 41% = 36,080
Taxable gain 88,000 - 36,080 = 51,920

tax calculation:
Net taxable gain:  51,920 - CGT allowance (currently 3,000) = 48,920
you would pay tax at 24% on most of that and possibly some at 18% depending on how much of your taxable earnings and other income is less than the £37,700 tax threshold 

you need a proper valuation at 1997 and you also need to deduct legal fees and EA costs from the 88,000 gain associated with the sale (clearly as it was a gift you have no costs associated with receiving in in 1997). The % calculation should be in months, not years.

important - you have 60 days from the date of completion of sale in which to declare your CGT calculation and pay over the tax or you will face penalties.

Thankyou. Regarding the CGT annual allowance....currently it stands at £ 3000 but am I right in understanding it was much higher in previous years? And would those historic annual allowances be calculated that way too?

irrelevant - it is a one time only use it or lose it in the tax year in which you sell the item
you cannot claim unused amounts from previous years 

You seem very out of your depth given the 60 day time limit when it appears the sale has already taken place ....
Report and pay your Capital Gains Tax: If you sold a property in the UK on or after 6 April 2020 - GOV.UK

spiritus

Bookworm105 said:

spiritus said:

Bookworm105 said:

spiritus said:

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

So....to plug some figures into that...

a) No idea what market value was in 1997. Houses on street not sold anywhere around that time but let's assume £ 75,000

b) I retained ownership after moving out in 2008 whilst my mum continued to reside there

c) I moved out in 2008-16 years ago

d) 41% taxable? I thought it was 18% or 20/24% on residential property?

e) House sold in 2024 for £ 163,000

my mistake, 59% not 41% is the taxable period of ownership
gain 163,000 - 75,000 = 88,000
main residence relief is 41% so 88,000 x 41% = 36,080
Taxable gain 88,000 - 36,080 = 51,920

tax calculation:
Net taxable gain:  51,920 - CGT allowance (currently 3,000) = 48,920
you would pay tax at 24% on most of that and possibly some at 18% depending on how much of your taxable earnings and other income is less than the £37,700 tax threshold 

you need a proper valuation at 1997 and you also need to deduct legal fees and EA costs from the 88,000 gain associated with the sale (clearly as it was a gift you have no costs associated with receiving in in 1997). The % calculation should be in months, not years.

important - you have 60 days from the date of completion of sale in which to declare your CGT calculation and pay over the tax or you will face penalties.

Thankyou. Regarding the CGT annual allowance....currently it stands at £ 3000 but am I right in understanding it was much higher in previous years? And would those historic annual allowances be calculated that way too?

irrelevant - it is a one time only use it or lose it in the tax year in which you sell the item
you cannot claim unused amounts from previous years 

You seem very out of your depth given the 60 day time limit when it appears the sale has already taken place ....
Report and pay your Capital Gains Tax: If you sold a property in the UK on or after 6 April 2020 - GOV.UK

Oh ok. Thank you for the patronising tone.

I had assumed (wrongly perhaps) that CGT forms are not submitted until the house is sold as the sale could always fall through at the last minute but you are correct in that I am "out of my depth", as you put it, hence why I posted the question here looking for advice.

Bookworm105

spiritus said:

Bookworm105 said:

spiritus said:

Bookworm105 said:

spiritus said:

Bookworm105 said:

a) 1997 market value is the start point, and then the total gain is the difference between that and the price she finally sells it for  = £ gain (less various costs)

b) one assumes you have retained ownership so to date so ownership period 1997 to date sold (assume 2024) = 27 years approx
 
c) Time period you did not live there as your own main home whilst co-owner, date moved out to date sold:  2008 - 2024 = 16 years approx

d) CGT main residence relief approx 16/27 = 59% Therefore taxable period 100-59 = 41%

e) Amount subject to tax:  £gain x 41%

The above is crude as calculation should be in months or days 


if mother has no record of the 1997 market value then she will need to employ a professional valuer to get it. As the gift was from mother to son that is a "connected person" transaction so must be at market value. A professional may choose to adjust it to allow for the fact the house was occupied rather than vacant possession so would have a lower value

So....to plug some figures into that...

a) No idea what market value was in 1997. Houses on street not sold anywhere around that time but let's assume £ 75,000

b) I retained ownership after moving out in 2008 whilst my mum continued to reside there

c) I moved out in 2008-16 years ago

d) 41% taxable? I thought it was 18% or 20/24% on residential property?

e) House sold in 2024 for £ 163,000

my mistake, 59% not 41% is the taxable period of ownership
gain 163,000 - 75,000 = 88,000
main residence relief is 41% so 88,000 x 41% = 36,080
Taxable gain 88,000 - 36,080 = 51,920

tax calculation:
Net taxable gain:  51,920 - CGT allowance (currently 3,000) = 48,920
you would pay tax at 24% on most of that and possibly some at 18% depending on how much of your taxable earnings and other income is less than the £37,700 tax threshold 

you need a proper valuation at 1997 and you also need to deduct legal fees and EA costs from the 88,000 gain associated with the sale (clearly as it was a gift you have no costs associated with receiving in in 1997). The % calculation should be in months, not years.

important - you have 60 days from the date of completion of sale in which to declare your CGT calculation and pay over the tax or you will face penalties.

Thankyou. Regarding the CGT annual allowance....currently it stands at £ 3000 but am I right in understanding it was much higher in previous years? And would those historic annual allowances be calculated that way too?

irrelevant - it is a one time only use it or lose it in the tax year in which you sell the item
you cannot claim unused amounts from previous years 

You seem very out of your depth given the 60 day time limit when it appears the sale has already taken place ....
Report and pay your Capital Gains Tax: If you sold a property in the UK on or after 6 April 2020 - GOV.UK

, hence why I posted the question here looking for advice.

my advice would be pay an accountant to do the calculations for you as drip feeding questions and answers with a clock ticking is not a wise way to DIY when you have done no research of your own