are there any tax implications for a joint owner of property paying there share back years later

Keep_pedalling

dinosaur66 said:

sheramber said:

You say the ownership was set up as 50/50

who had the 50/50 shares?
  

Do you one the house 50/50 with your mother? 


What are you trying to achieve?

i bought the property in question for my mother and father in 2003 

i actually paid all 100% of the cost but put the property 50% in my name and 50% in my mothers name 

my father was not on the deeds

i own 50% and have lived in this house with my mother who owns 50% since 2003

the property cost 250k in 2003 and i paid 42k for an annexe in 2005

my mother contributed nothing at the time and i paid the whole ammount

i have also paid all the bills /upkeep and maintenence for the past 22 years 

my mother now wants to pay £55k to me towards the cost of buying the house which she 50% owns 

there is no deprevation of assets on the house payable  . rest of my family are fine with the payment no issues at all.

i want to do it legal with the aim as paying as little tax as possible on the money

One consideration is IHT. Assuming you have no children and have no spouse your estate only has an exemption of a single NRB (£325k) and if your mother gifts you this £55k (or you make a deed of variation, and you die before her then your share of the house plus that gift alone pushes your estate into IHT territory. As she is a widow and a home owner she has IHT exemptions up to £1M (assuming your parents were married or civil partners) so her estate is almost certainly exempt from IHT. 

In your shoes I would simply leave the arrangements as they are.

dinosaur66

thank you keep-peddling

i am the only 1 of the 5 siblings never to marry or have children so my iht threshold is the lowest at £325k as you said

we are both liable for inheritance tax if anything happened to us

my mother is 83 and i am 59

my mother inherited land and property

she has a will which all my siblings have seen

my mother while 83 is very fit for her age and her mother was fit as a fiddle at 98 with no mental loss whatsoever / she had a fall on her farm causing a brain bleed.

poseidon1

dinosaur66 said:

thank you keep-peddling

i am the only 1 of the 5 siblings never to marry or have children so my iht threshold is the lowest at £325k as you said

we are both liable for inheritance tax if anything happened to us

my mother is 83 and i am 59

my mother inherited land and property

she has a will which all my siblings have seen

my mother while 83 is very fit for her age and her mother was fit as a fiddle at 98 with no mental loss whatsoever / she had a fall on her farm causing a brain bleed.

OK based on everything you said here's how I see the IHT position if your mother proceeds with

the gift :

* Currently and because of her widowed status and assuming your father left his entire estate  to her when he died, she has nil rate bands totalling £1 million comprised of 2 x £325k and 2× £175k.

* If she makes a £55k cash gift to you, it will use her £3,000 gift allowance this tax year, and if she made no gifts in the previous 2024/25 tax year, that unused allowance is carried forward to give her a total of £6,000. 

* This then leaves £49k gift exposed.  If she dies within 7 years all that happens is £49k is deducted from her nil rate bands, leaving a total of £951,000 to shelter her total estate from IHT. If she survives 7 years, the £49k drops out of the computation and her nil rate bands resume at £1 million or whatever the new limits might be at the time.

You say your mother will be liable for IHT regardless of her £1 million nil rate bands ( via inherited land and property). I assume that taking her half share of the house you share at a value of £300k, you are saying the rest of her estate is valued in excess of £700k?

If so, other than the relatively small gift of £55k to you ( which I see no issues with), is she considering any other strategies to reduce her IHT exposure? I assume the land and property she inherited is worth more than £700k. When did she inherit and from whom?


EDIT:

I also  note your reference to a farm. Is this where you both live and are you working farmers? Did she inherit farm land and accommodation linked to a farming operation?

dinosaur66

thank you for the reply

my father had no money at all / he was ill for many years and i  supported him financially and acted as his carer.

i did not put him on the deeds of the house although he was registered as living here

he died in 2015

thank you for clarification of gift tax laws / i never new that i thought you could only gift 6k a year using the Ai review i read

i can see that this was wrong thanks to your explanation

and with that then the sums involved would be quite small and not onerous

my mother is irish but has lived in england since 1963 she inherited a third of my grandfathers/mothers farm in ireland in early 2020  / the farm was sold in 2016 but took 4 years to distribute the inheritance due to parcels of land seperate from the farm that were not registered but were owned.

i have never farmed nor my mother bar helping out as a young girl

her iht liabilty was done by a financial advisior at the time but we all wanted her to keep 400k outside of this to spend on herself on anything she would like and not to save it .

but covid hit and she could not go out or abroad and spend anything and then interest rates went up  and she now spends 5 months a year with extended family in scotland who pay for everything for her and take her out nearly every day and 7 months with me and i pay for  everything bar her clothes so with her pension and interest i think she has been getting about £800 a week 

.

poseidon1

Seems to me if your mother's estate is  now represented by the 50% share of the house, together with £400k proceeds of sale of Irish land and property, she has no exposure at all to IHT on her total £700k estate.

   Certainly gifting  you the £55k now being considered, can do no harm (as outlined in my post),  and would seem to make your mother feel a little better about all the help and support you have provided her over the years ( I suspect no amount of money would really reflect all you have done for both parents!).

She  has been unable to spend her inheritance on herself, perhaps you can do a better job for yourself with your £55k gift.