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Capital gains tax on selling an expensive house for a cheaper one
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Only within the 7 year rule, after that it's mine 100%??Grumpy_chap said:
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.fireballpaul said:
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 :-(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....0 -
The seven year rule applies specifically to IHT - the check for deprivation of assets (in the event of seeking council-funded care) is unrelated and can go back further than that.fireballpaul said:
Only within the 7 year rule, after that it's mine 100%??Grumpy_chap said:
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.fireballpaul said:
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 :-(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....1 -
no, if (BIG IF) the council have grounds for claiming deprivation of capital then there is no time limit.fireballpaul said:
Only within the 7 year rule, after that it's mine 100%??Grumpy_chap said:
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.fireballpaul said:
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 :-(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....
Yes of course you would be the legal owner of the property, and the council cannot make you to sell it, But that is not what D0C is all about, rather it means your parents would be refused council funding for their care home costs on the basis they "gave away" £ thousands of property. They are therefore treated as though they still had that money and could use it to fund their own care, not expect the council to pay for them.
DoC is much talked of (and should never be ignored) but is rather rare in practice and the circumstances where under the council has a cast iron legal grounds for refusing to foot the care cost are often very hard to prove.
Bottom line is the house will be yours, but potentially your parents would go hungry - very unlikely to happen. The first stumbling block for the council is they need to establish that at the point in time the parents gave their capital away they had a reasonable expectation that they would need care "soon". "Soon" is a very subjective measure, 5 years later is not soon, how about 1 year? or 1 month (yes of course that latter is categorically soon).
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thank you nicely explained. Well luckly they have all their marbles and are very fit so I don't think it will apply here.Bookworm225 said:
no, if (BIG IF) the council have grounds for claiming deprivation of capital then there is no time limit.fireballpaul said:
Only within the 7 year rule, after that it's mine 100%??Grumpy_chap said:
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.fireballpaul said:
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 :-(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....
Yes of course you would be the legal owner of the property, and the council cannot make you to sell it, But that is not what D0C is all about, rather it means your parents would be refused council funding for their care home costs on the basis they "gave away" £ thousands of property. They are therefore treated as though they still had that money and could use it to fund their own care, not expect the council to pay for them.
DoC is much talked of (and should never be ignored) but is rather rare in practice and the circumstances where under the council has a cast iron legal grounds for refusing to foot the care cost are often very hard to prove.
Bottom line is the house will be yours, but potentially your parents would go hungry - very unlikely to happen. The first stumbling block for the council is they need to establish that at the point in time the parents gave their capital away they had a reasonable expectation that they would need care "soon". "Soon" is a very subjective measure, 5 years later is not soon, how about 1 year? or 1 month (yes of course that latter is categorically soon).0 -
I just read this online:Nomunnofun1 said:
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 said:
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 doneNomunnofun1 said:
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 said:
it was gifted over and some CGT was paid.Nomunnofun1 said:
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?fireballpaul said:
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.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.Can you confirm how the property ended up in your name?£325,000The inheritance tax threshold in the UK is currently £325,000. This means that the first £325,000 of an estate is tax-free, and the 40% tax rate applies only to assets over this threshold. If a house the deceased lived in before dying is left to their children or grandchildren, the threshold increases to £500,000.0 -
but the point is it is per person. Both your parents are still alive and they own a house 325 personal "allowance"fireballpaul said:
I just read this online:Nomunnofun1 said:
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 said:
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 doneNomunnofun1 said:
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 said:
it was gifted over and some CGT was paid.Nomunnofun1 said:
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?fireballpaul said:
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.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.Can you confirm how the property ended up in your name?£325,000The inheritance tax threshold in the UK is currently £325,000. This means that the first £325,000 of an estate is tax-free, and the 40% tax rate applies only to assets over this threshold. If a house the deceased lived in before dying is left to their children or grandchildren, the threshold increases to £500,000.
+ 175 property nil rate residence band = 500k for him and 500k for her.
So, as mentioned, the total for a couple with a property is 1m2 -
Did you not read the age uk article in full? It made it clear where £1million comes from.fireballpaul said:
I just read this online:Nomunnofun1 said:
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 said:
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 doneNomunnofun1 said:
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 said:
it was gifted over and some CGT was paid.Nomunnofun1 said:
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?fireballpaul said:
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.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.Can you confirm how the property ended up in your name?£325,000The inheritance tax threshold in the UK is currently £325,000. This means that the first £325,000 of an estate is tax-free, and the 40% tax rate applies only to assets over this threshold. If a house the deceased lived in before dying is left to their children or grandchildren, the threshold increases to £500,000.
Forumites here are generous in trying to assist where there is genuine lack of knowledge or misconceptions, but the least you could have done is to have read beyond the first few lines of the article you chose to share.3 -
Can only agree - annoying that a poster asks for advice and subsequently queries that same advice by countering inaccurately.poseidon1 said:
Did you not read the age uk article in full? It made it clear where £1million comes from.fireballpaul said:
I just read this online:Nomunnofun1 said:
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 said:
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 doneNomunnofun1 said:
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 said:
it was gifted over and some CGT was paid.Nomunnofun1 said:
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?fireballpaul said:
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.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.Can you confirm how the property ended up in your name?£325,000The inheritance tax threshold in the UK is currently £325,000. This means that the first £325,000 of an estate is tax-free, and the 40% tax rate applies only to assets over this threshold. If a house the deceased lived in before dying is left to their children or grandchildren, the threshold increases to £500,000.
Forumites here are generous in trying to assist where there is genuine lack of knowledge or misconceptions, but the least you could have done is to have read beyond the first few lines of the article you chose to share.1 -
Apologies, sometimes difficult to remember that it applied to 2 people. ThanksNomunnofun1 said:
Can only agree - annoying that a poster asks for advice and subsequently queries that same advice by countering inaccurately.poseidon1 said:
Did you not read the age uk article in full? It made it clear where £1million comes from.fireballpaul said:
I just read this online:Nomunnofun1 said:
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 said:
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 doneNomunnofun1 said:
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 said:
it was gifted over and some CGT was paid.Nomunnofun1 said:
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?fireballpaul said:
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.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.Can you confirm how the property ended up in your name?£325,000The inheritance tax threshold in the UK is currently £325,000. This means that the first £325,000 of an estate is tax-free, and the 40% tax rate applies only to assets over this threshold. If a house the deceased lived in before dying is left to their children or grandchildren, the threshold increases to £500,000.
Forumites here are generous in trying to assist where there is genuine lack of knowledge or misconceptions, but the least you could have done is to have read beyond the first few lines of the article you chose to share.1 -
Just a thought, but if one parent dies and leaves everything to the spouse, doesn't that single parent now have double the assets from then on? Then when the worst happens to them they will have a higher threshold.poseidon1 said:
Did you not read the age uk article in full? It made it clear where £1million comes from.fireballpaul said:
I just read this online:Nomunnofun1 said:
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 said:
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 doneNomunnofun1 said:
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 said:
it was gifted over and some CGT was paid.Nomunnofun1 said:
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?fireballpaul said:
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.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.Can you confirm how the property ended up in your name?£325,000The inheritance tax threshold in the UK is currently £325,000. This means that the first £325,000 of an estate is tax-free, and the 40% tax rate applies only to assets over this threshold. If a house the deceased lived in before dying is left to their children or grandchildren, the threshold increases to £500,000.
Forumites here are generous in trying to assist where there is genuine lack of knowledge or misconceptions, but the least you could have done is to have read beyond the first few lines of the article you chose to share.0
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