Another Capital Gains Tax Question!

Braiinfish

Hi, I'm in Scotland if that makes a difference.

I inherited my parents house after my mum passed away earlier this year and this is now my and my partner's primary residence. We moved in with her 2 years ago to become her full time carers.. Her total estate was below the IHT Threshold and all matters in her estate have now been settled, confirmation etc given.

My partner and I also own "our" house outright (no mortgage) which we will be selling soon. We understand we'll be liable for CGT on that when it's sold as it's no longer our primary residence.

But, my parent's house was left only to me and I want to sign half of it over to my partner. We're not married or in a Civil Partnership, so my question is, would she be liable for any CGT on the half share of the house if I gifted it to her?

Or would it be better for me to keep the whole house and state in my will that it goes to her? We're getting new "mirror wills" made next week along with lasting Power of Attorney over each other.

I know the easy answer is get married or get a Civil Partnership then it won't matter. We'll do one of them eventually but we've had enough stress over the last 2 years to organise anything like that in the near future.

Thanks in advice

Jeremy535897

You will both have a capital gain on the disposal of the house you no longer live in, but the capital gain will be apportioned, on a time basis, between exempt (the period you occupied it as your main residence, plus the last 9 months of ownership), and taxable (the rest of the period of ownership). See: https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2024 for more details.
As you will have occupied your mother's house as your main residence from the date you became the owner of it, transferring part of it to someone else will not result in capital gains tax being payable, because any gain since your mother's death will be covered by the main residence exemption.
Scotland's rates of capital gains tax are no different to England and Wales.

Braiinfish

Thanks Jeremy,

I understand about the house we no longer live in, so that's all OK and CGT will be paid on that when we sell it.

I became the owner of my mother's house on October 17th, although I've yet to sign anything. The lawyer dealing with the estate asked if I wanted the house solely in my name or in both of our names and suggested that my partner may have to pay CGT if I put this house in both of our names.

Seems like the lawyer is just covering themself and we should be OK

Keep_pedalling

If it is your primary residence CGT does not come into it. The thing I would be most concerned about is IHT if you met an untimely early demise. Is your net worth in excess of £325k? If it is you estate would be looking at an IHT liability if you died in your current marital status. The gift to your partner would remain within your estate for 7 years so it really makes no difference whether you keep the house in your name or become joint owners for the medium term.

Anything left to a spouse or CP is exempt regardless of how much it is. 

Bookworm105

I don't think one actual question has been answered yet?
@Jeremy535897

as an unmarried couple if you gift 50% (transfer) ownership of the current main home (that inherited from mother in your sole name) to your partner, does she acquire a claim to PRR for the period since you inherited it but she was not a co-owner of it whilst living there in that period?

she would if you were married, but I'm unsure for unmarried couple as this specifically deals with a married scenario so by implication unmarried may not????
CG64925 - Private residence relief: ownership period: spouses or civil partners and legatees - HMRC internal manual - GOV.UK

Jeremy535897

Bookworm105 said:

I don't think one actual question has been answered yet?
@Jeremy535897

as an unmarried couple if you gift 50% (transfer) ownership of the current main home (that inherited from mother in your sole name) to your partner, does she acquire a claim to PRR for the period since you inherited it but she was not a co-owner of it whilst living there in that period?

she would if you were married, but I'm unsure for unmarried couple as this specifically deals with a married scenario so by implication unmarried may not????
CG64925 - Private residence relief: ownership period: spouses or civil partners and legatees - HMRC internal manual - GOV.UK

No, she won't, because at the time of the transfer they are not married or in a civil partnership. Whilst they remain unmarried and not in a civil partnership, they are just two co-owners of a property and their ownership period is the actual period of ownership for each owner.
If and when they choose to marry subsequent to the transfer, that still won't change, as the transfer will have taken place before marriage.
If the property remains their main residence throughout their ownership, there will of course be no capital gains tax under the current legislation.

Braiinfish

Thanks all. Looks like we'll be OK having both names on the deeds. Now we just need to sell the other property!