Capital gains tax on selling an expensive house for a cheaper one

Nomunnofun1

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

fireballpaul

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Nomunnofun1

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

fireballpaul

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

I don't thnk that's the case.  I thought there would be some IHT and the figure for that is well below £1m. 

Nomunnofun1

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

I don't thnk that's the case.  I thought there would be some IHT and the figure for that is well below £1m. 

I’m afraid not. Each parent has £325000 exemption plus resident home allowance of £175000. 

Any percentage of the allowance not utilised on first death can be passed to the surviving spouse. 

Have a quick read here, particularly points 3 and 4. 

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/

Bookworm225

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

I don't thnk that's the case.  I thought there would be some IHT and the figure for that is well below £1m. 

does not answer the question
mum + dad have total combined estate of £1m tax free

the 7 year gift rule is irrelevant if their estate is below that level, ie total of house + gifted house + all other money and assets they will leave on death 

Nomunnofun1

Bookworm225 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

I don't thnk that's the case.  I thought there would be some IHT and the figure for that is well below £1m. 

does not answer the question
mum + dad have total combined estate of £1m tax free

the 7 year gift rule is irrelevant if their estate is below that level, ie total of house + gifted house + all other money and assets they will leave on death 

Thank you - put much more succinctly than I did. 

From the article:

‘On top of this, your spouse's Inheritance Tax allowance rises by the percentage of your allowance you didn't use. This means a married couple can leave up to £1 million tax-free (2 x £325,000 tax-free allowances + 2 x £175,000 main residence allowances).’

fireballpaul

Bookworm225 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

I don't thnk that's the case.  I thought there would be some IHT and the figure for that is well below £1m. 

does not answer the question
mum + dad have total combined estate of £1m tax free

the 7 year gift rule is irrelevant if their estate is below that level, ie total of house + gifted house + all other money and assets they will leave on death 

thanks.  Hmm, there was a reason for the gift so I will find out and get back to you. 

Nomunnofun1

fireballpaul said:

Bookworm225 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

Nomunnofun1 said:

fireballpaul said:

MarlowMallard said:

Correct, but note that it must have been your main home for nearly all the time you owned it...  if you rented it out in the past and lived elsewhere then moved in, only the fraction of time you lived there plus the final year or so is CGT-free.  A married/civil partner couple can only have one "main home" between them. 

No problem. It's been my main home for 20 years,  rented it from my parents for about 17 years and now have it in my name for the last 3. 

Presumably it was not your parent’s main residence then? In that case how was the disposal of the property to you by your parents three years ago treated with respect to capital gains tax? 

Can you confirm how the property ended up in your name?

it was gifted over and some CGT was paid.   

Excellent! Is your parents’ estate likely to be above £650000 or £1m if it would include their main residence? If not, the seven year rule is irrelevant as no IHT in play. 

No, i think it's under £500k (now that this £250k house is not part of it) but the house was gifted to avoid IHT as there's no reason to think they won't live another 4 years.    I am certain there would be some IHT if this had not been done

Can you explain as to why you think that there is a potential liability to inheritance tax? If your mother and father are both alive and well and own a property there would be no inheritance tax payable unless the estate exceeded £1m. You have indicated that it will be nowhere near that, even if the gifted property is included. 

I don't thnk that's the case.  I thought there would be some IHT and the figure for that is well below £1m. 

does not answer the question
mum + dad have total combined estate of £1m tax free

the 7 year gift rule is irrelevant if their estate is below that level, ie total of house + gifted house + all other money and assets they will leave on death 

thanks.  Hmm, there was a reason for the gift so I will find out and get back to you. 

It could well be that your parents were content to pay the CGT at the time of the transfer in order for you to benefit from the gift at that time-  which is fine. 

While I appreciate that I strayed somewhat from the original question you, at least, now know that there is no seven year rule relevant in respect of the gift of the property. Clearly, whether or not the property had been gifted, there was no prospect of any liability to inheritance tax. 

Sarahspangles

fireballpaul said:

thanks.  Hmm, there was a reason for the gift so I will find out and get back to you. 

Often the reasoning relates to minimising assets that could be used to fund elderly care. But in your case, as this property has been your home for so long I don’t think this is relevant.

The other thing to be aware of is that the inheritance tax arrangements mentioned by others apply to spouses. It’s becoming more common for people not to marry or at least not to be married to their partner going into retirement. In which case they have individual allowances and can leave property to their children, but the arrangement where allowances are pooled and inheritance tax isn’t due until the second death doesn’t apply.