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

Grumpy_chap

fireballpaul said:

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

There are quite a few threads on here where people report having read shock-horror scandal stories in the tabloid press and then take action relating to avoiding either IHT and / or care home fees.  Often without ever having sufficient that their Estate will be affected by IHT, making the gift in such a way that it remains in the Estate anyway for IHT purposes or not realise that gift is still counted as an asset in the case of funding care home fees.  

It is not unusual to read threads where the gifting to avoid IHT and / or care homes fees fails in both regards and also creates new tax liabilities that would never have existed had the gifting not occured.

I can quite imagine, also, that there is some scaremongering / boasting amongst senior generations where they work each other up into a frenzy. 
Consider one couple reading the Daily Fail and deciding to gift £xxxx to their children to avoid IHT.  Then Mr & Mrs Jones are at the next dinner party and chatting away about the gift they had to made and the total injustice of it - of course a bit boastful as it is saying how successful they've been. 
Hearing this, Mr & Mrs Brown who know they had just as good jobs as the Jones's, go home and have been so worked up they too make some gift to their offspring.
Mr & Mrs Smith, however, are better informed and took proper advice rather than relying on the tabloid press and dinner party chit chat for important financial decisions.  When it comes to it, the Jones's and the Brown's might well be jealous of the standard of care home the Smith's are enjoying, despite them never having had high flying careers or flash cars...

sheramber

Everyone seems to have assumed the OP’ parents were married.

Bookworm225

sheramber said:

Everyone seems to have assumed the OP’ parents were married.

OP has already replied that his parent's tax position is sorted. Let sleeping dogs lie?

sheramber

Bookworm225 said:

sheramber said:

Everyone seems to have assumed the OP’ parents were married.

OP has already replied that his parent's tax position is sorted. Let sleeping dogs lie?

Not for IHT. 

He is being told there would be none on the basis of transferable relief from Spouse.

UnsureAboutthis

This is my take on the thread and I may or may not be wrong

Parents property eventually gifted to OP
As it stands, no IHT
Depending on the market value of the gift and the price if sold today, then there
may be CGT after selling costs, and some improvements have been taken into account.

Nomunnofun1

UnsureAboutthis said:

This is my take on the thread and I may or may not be wrong

Parents property eventually gifted to OP
As it stands, no IHT
Depending on the market value of the gift and the price if sold today, then there
may be CGT after selling costs, and some improvements have been taken into account.

Not correct - op has confirmed that it was main residence throughout period of ownership - no CGT! 

fireballpaul

Ok have spoken with father.  He (they) wanted to get the house off their hands at the same time as making a gift to me.  The estate would not be anywhere near £1m even if the house had remained so it appears there was no need for the IHT as someone above said.  

They had a CGT bill of around £6k for the trouble of signing it over to me - but it also means they no longer have the asset and don't have to do any repair work or other burdens etc...

So this 7 year rule doesn't apply even if I wanted to sell it straight away?

eskbanker

The seven year rule simply means that the asset is still considered part of your parents' estates for IHT purposes if they die within seven years of disposing of it, so what you do with that thereafter doesn't come into the equation, but if the estates are below IHT threshold anyway then it's academic....

fireballpaul

eskbanker said:

The seven year rule simply means that the asset is still considered part of your parents' estates for IHT purposes if they die within seven years of disposing of it, so what you do with that thereafter doesn't come into the equation, but if the estates are below IHT threshold anyway then it's academic....

Thank you.  So the only difference is I'm getting the house now rather than waiting for that awful day when my last parent dies :-(

Grumpy_chap

fireballpaul said:

eskbanker said:

The seven year rule simply means that the asset is still considered part of your parents' estates for IHT purposes if they die within seven years of disposing of it, so what you do with that thereafter doesn't come into the equation, but if the estates are below IHT threshold anyway then it's academic....

Thank you.  So the only difference is I'm getting the house now rather than waiting for that awful day when my last parent dies :-(

Except for if your parents require care home and the Local Authority consider the house an asset that could be used to fund the care home fees and invoke Deprivation of Assets.