Active discussions

Meet the Other Phone. A phone that grows with your child.

Meet the Other Phone.
A phone that grows with your child.

Buy now

Please or to access all these features

Talk
Legal matters

Mumsnet has not checked the qualifications of anyone posting here. If you have any legal concerns we suggest you consult a solicitor.

Original poster

Capital Gains Tax on Gifted Property

14 replies

MissTeri · 22/01/2018 21:19

Just wondering if anyone could clarify something for me (well my mum actually).

My nan recently decided that she would sign her house over to my mum. Her reason for doing so is that she felt if she left it to my mum in her will that her sons (my mums two brothers) could contest the will saying she was not of sound mind etc so she thought it better to sign it to my mum now. The brothers will still inherit money and they know about the situation and are actually okay about it.

My mum already owns her own home and is now being told by people that when something happens to my nan and my mum comes to sell the house that she could end up losing half the value of it due to having to pay capital gains tax.

However my understanding is that she will have to pay capital gains tax only on the amount the house value has increased by from the date it was gifted to her and the date it has sold. So say the house is worth £140k market value now and she sells it for £160k then she will pay capital gains tax on the £20k not the £160k? Is this incorrect?

I've tried looking online but it just leaves me even more confused. Can anyone make it clearer for me?

OP posts:
TheAntiBoop · 22/01/2018 21:27

If none of the inheritance tax issues arise

capital gains tax is, simply, proceeds of sale less original cost. In the case of a gift the base cost will not be market value at the date of the gift but the original cost of the giver

StripySocksAndDocs · 22/01/2018 21:28

You're right.

It's only on the gain; it'll never be 'half the value'.

Original poster
MissTeri · 22/01/2018 21:30

TheAntiBoop - Yes it does, thank you! It seems then that the CGT would be calculated at 18% of the profit from when it was first purchased until the time of it being gifted. Really hope I'm understanding it correctly now (I am hopeless with these kind of things but trying to learn).

OP posts:
TheAntiBoop · 22/01/2018 21:31

Did your gran pay capital gains tax when she gifted the property?

StripySocksAndDocs · 22/01/2018 21:32

Are you in the UK?

There'll be certain deductions she can make from the gain before she calculates the tax liability. I find this fairly straightforward:

www.gov.uk/tax-sell-property

Original poster
MissTeri · 22/01/2018 21:32

It's only on the gain; it'll never be 'half the value'. - but it's on the gain that my nan has made from purchase to gift rather than on my mums gain from when it was gifted to her selling it?

OP posts:
Original poster
MissTeri · 22/01/2018 21:34

No my nan didn't pay CGT when she gifted, so that would fall to my mum when she sells I assume?

Yes we're in the UK.

Thanks stripeysocks will check out the link.

OP posts:
Mathbat · 22/01/2018 21:34

Gran wouldnt have had to pay CGT on the gift as the main residence exemption applies. Daughter will pay cgt on the difference between the house’s value at the date of the gift and the net sale proceeds when she sells it. Had specialist legal advice been taken prior to the gift, the cgt issue could have been avoided.

TheAntiBoop · 22/01/2018 21:36

If it is the house your gran lives in then she would not have to pay tax on the sale as she gets relief. She on that basis she should put in a return showing the market value at the date of transfer, gain and relief. Your mum then has her base cost as market value at date of transfer.

Is your gran still living in the house?

TheAntiBoop · 22/01/2018 21:38

It's important this is all done formally and your gran pays a market rent if she is still living there

Original poster
MissTeri · 22/01/2018 21:41

Ahhh okay thanks Mathbat that makes sense now - I was just going to ask about the primary residence expemption!
They only went to the solicitors to sign the transfer of deeds today too, I wish they'd looked into it more instead of rushing it but I can't see the CGT being much though.

Yes my nan still lives in the house and will do until she passes - or needs to move in with my mum to be cared for if it came to that.

My nan should now pay rent to my mum TheAntiBoop?

OP posts:
StripySocksAndDocs · 22/01/2018 21:47

Your mum pays from the date she received it.

(You might be confused by a gift between spouses or civil partners. This is calculated from the date the original partner got the house.)

As said nan wont pay Cgt because it was her main house. The tax here is inheritance tax; which is different:

www.gov.uk/inheritance-tax/passing-on-home

Original poster
MissTeri · 22/01/2018 22:01

Thanks everyone for your advice, it's certainly given my mum peace of mind. My mum will be seeking further advice about it and is feeling rather foolish that they both didn't get more advice before hand Smile

OP posts:
New posts on this thread. Refresh page