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apronedsamurai
Posts: 78 Forumite
Hi.
My mother is contemplating buying me a house.
She owns 2 properties, and we are in Scotland, and so we would be looking at 3% Stamp Duty (property is circa 90k).
However, I am concerned as to the potential capital gains liabilities that she would be liable for.
1) What if she bought the house for me, she died, and I subsequently sold the home after she died? I assume that I am liable for the CGT, given that I am the owner of the property.
2) If she bought the house, and the house was sold BEFORE she died...what would the potential CGT be?
3) I am on benefits. She suggested that I could be gifted the money, buy the house...but I figured this would nullify my benefit eligibility? Also think this might be illegal (certainly sounds rather legally questionable and so strongly discouraging from this option)
4) Finally. Is the tax free allowance allocated between CGT AND income tax...or is it one allowance for both CGT and IT
In any case, the house that my mother bought me for would be for the foreseeable future be MY main, principal home.
Thanks
My mother is contemplating buying me a house.
She owns 2 properties, and we are in Scotland, and so we would be looking at 3% Stamp Duty (property is circa 90k).
However, I am concerned as to the potential capital gains liabilities that she would be liable for.
1) What if she bought the house for me, she died, and I subsequently sold the home after she died? I assume that I am liable for the CGT, given that I am the owner of the property.
2) If she bought the house, and the house was sold BEFORE she died...what would the potential CGT be?
3) I am on benefits. She suggested that I could be gifted the money, buy the house...but I figured this would nullify my benefit eligibility? Also think this might be illegal (certainly sounds rather legally questionable and so strongly discouraging from this option)
4) Finally. Is the tax free allowance allocated between CGT AND income tax...or is it one allowance for both CGT and IT
In any case, the house that my mother bought me for would be for the foreseeable future be MY main, principal home.
Thanks
0
Comments
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Stamp Duty is no longer applicable in Scotland. Scottish purchases are subject to LBTT (Land and Buildings Transaction Tax).
https://www.revenue.scot/land-buildings-transaction-tax0 -
1. when she died the value of the house would be included in her estate for inheritance tax purposes. Her estate may or may not have to pay IHT depending on the size of the estate.apronedsamurai wrote: »1) What if she bought the house for me, she died, and I subsequently sold the home after she died? I assume that I am liable for the CGT, given that I am the owner of the property.
CGT is not payable on death
you would inherit the property at the value given to it for probate purposes when she died and as it is your main home you, as new owner, would be exempt from CGt when you sell given you say it will remain your main home
she would pay CGT on the gain in value between what she paid to buy and what she sells it for. Note if she sells it to you then tax law deals with the specific circumstance by requiring use of the market value, not what you paid her, so she cannot evade tax by selling to a "connected person" (ie you) at a discountapronedsamurai wrote: »2) If she bought the house, and the house was sold BEFORE she died...what would the potential CGT be?
use google to find out basic facts yourself...
https://www.gov.uk/capital-gains-tax
I am no benefits expert but I think if you own your own main home then that is not counted as capital when collating how much money you have for means test purposesapronedsamurai wrote: »3) I am on benefits. She suggested that I could be gifted the money, buy the house...but I figured this would nullify my benefit eligibility? Also think this might be illegal (certainly sounds rather legally questionable and so strongly discouraging from this option)
they are separate allowances and have nothing to do with each other. If you have a capital gain you get a capital allowance - read the link above...apronedsamurai wrote: »4) Finally. Is the tax free allowance allocated between CGT AND income tax...or is it one allowance for both CGT and IT0 -
Thank you!
Very helpful.
We don't have any desire to defraud.
We would like to maximise the allowances etc, but we are not looking to engage in tax evasion.
She would not sell to me, it is purely a case of Bank of Mummy buying her son a house as a gift.
My comment about the benefits was in relation to my mother giving ME the money...and then I used that capital to buy the house. My concern is that the moment the money hit my bank account, because it would be in excess of £16,000 would trigger the forfeiture of eligibility to state benefits.0 -
Would it not be best for your Mum to pay for the house, but it will be in your name? There is no gift tax in the UK, she is free to buy her child a house. There will be no capitals gain tax, as it is your PPR and never owned by your Mum.
It is no different to when people are given deposits by their parents, in this case, the 'deposit' will be 100%.
If your Mum were to die within 7 years of the gift, and her total estate was over £325k (including the house value) or £650k if she is / was married, then it could be taken into account but that is the only concern from a tax point of view.
My understanding is that the value of the house in which you live is not taken into account for means tested benefits, although I'm not an expert on all benefits, so other posters can help by correcting me if I am incorrect.0 -
Thats...what we wanted to do,
Would it not be best for your Mum to pay for the house, but it will be in your name?"
I just wanted to make sure we were in full compliance with Scottish/UK tax law and and cheating anyone
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don't know - ask one of the benefits peopleapronedsamurai wrote: »My comment about the benefits was in relation to my mother giving ME the money...and then I used that capital to buy the house. My concern is that the moment the money hit my bank account, because it would be in excess of £16,000 would trigger the forfeiture of eligibility to state benefits.0 -
You can legally be gifted the money to buy the house but why should you, after all I don't mind paying for everything you have, no point letting your mother do it for us.0
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