Inheritance Tax


S

Sam Smith

Quick question:

I have 2 houses. If I want to give one (not my main residence) to my
daughter what are the tax implications? Does she have to pay CGT on the
property? Is there an inheritance tax due? She will be living in it as her
main residence.

Thank you for your help. If there are any links you can point me at then I
will have gladly have a look but I am struggling to find anything useful to
me on the government site.
 
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R

Ronald Raygun

Sam said:
Quick question:

I have 2 houses. If I want to give one (not my main residence) to my
daughter what are the tax implications? Does she have to pay CGT on the
property?
No, you do, just as you would if you were selling it to her (or indeed
to anyone else) at market value. Has this house ever been your main
residence? If so, this would reduce your CGT bill.

Alternatively, don't give it to her all at once. Give her, say, a
quarter share this tax year, and another in each of the next three.
This would make best use of your annual CGT exempt amounts.

Do you have a wife? You could gift her half the house tax
free, and then each of you could gift shares to your daughter,
thereby getting the benefit of two tranches of CGT exempt amounts
each year.

Alternatively, don't give it to her at all, just let her live in it
rent-free. There will still be IHT due, of course, since the house
will still be part of your estate when you die.
Is there an inheritance tax due?
Only if you die within 7 years of making the gift. More to the point,
though, if you do die within 7 years, there will be a double whammy of
having to pay both CGT (at the time of making the gift) and IHT later.
This is one point in favour of the renting scheme, since at least it
definitely avoids CGT at the expense of definitely not avoiding IHT.
She will be living in it as her main residence.
That just means she wouldn't have to pay CGT when in due course she
sells it again.
 
S

Sam Smith

Alternatively, don't give it to her all at once. Give her, say, a
quarter share this tax year, and another in each of the next three.
This would make best use of your annual CGT exempt amounts.
Thanks for this.

Yes I am married. So basically if we were to give her a share each year
(thereby fitting into the CGT allowance) no-one would pay any tax unless of
course we die within 7 years of her being given the property?
 
R

Ronald Raygun

Sam said:
Yes I am married. So basically if we were to give her a share each year
(thereby fitting into the CGT allowance) no-one would pay any tax unless
of course we die within 7 years of her being given the property?
That's right. But don't ask me about the legal mechanics of piecemeal
conveyancing.
 
R

Robert

Sam said:
Yes I am married. So basically if we were to give her a share each year
(thereby fitting into the CGT allowance) no-one would pay any tax unless
of course we die within 7 years of her being given the property?
If your income is big enough that you could afford to pay her this much
out of income then you might to better to do that and let her buy (aprt
of) the house from you at the commercial rate. "Regular Gifts out of
income" do not count for your inheritance tax. But you need to keep
records so that your executors and show the gifts came from income not
by selling capital.

Robert
 
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