Stamp duty on gifting house?

Stamp duty on gifting house?

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tight fart

Original Poster:

2,865 posts

272 months

Friday 21st October 2016
quotequote all
A friend of mine has just lost Dad and now rather late Mum has started to think about inheritance tax, wills etc.
She's 86 and wants to gift her house to her 2 sons, they both own their own property.
Big mouth me suggest they may have to pay stamp duty on the transfer and at the 2nd home owner rate, am I right?

Eric Mc

121,763 posts

264 months

Friday 21st October 2016
quotequote all
Per HMRC -

"SDLT does not usually apply if the property is given and received purely as a gift and there is no chargeable consideration".

Note the word "usually" - so the statement is only correct MOST of the time.

knk

1,265 posts

270 months

Friday 21st October 2016
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And it must be a gift without reservations, so she will need to pay market rent (which they will have to pay any income tax due on).
It needs good advice and proper planning with a clear diligent audit trail.

Ozzie Osmond

21,189 posts

245 months

Friday 21st October 2016
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tight fart said:
She's 86 and wants to gift her house to her 2 sons,
As above, no stamp duty but MUST pay a market rent to live in her own house.

Seriously, at 86 she's left it a bit late to start Inheritance tax planning. Any gift stays "on the record" for 7 years and....

  • IHT is charged at 40% on death, but ONLY on any excess over £325,000
  • After surviving 3 years the tax payable reduces to 80% of the original total
  • After surviving 4 years the tax payable reduces to 60% of the original total
  • After surviving 5 years the tax payable reduces to 40% of the original total
  • After surviving 6 years the tax payable reduces to 20% of the original total
Note that from 2017/18 there will be an additional nil rate band for the family home over and above the usual £325k. More on this link,
https://www.gov.uk/government/publications/inherit...

brrapp

3,701 posts

161 months

Friday 21st October 2016
quotequote all
Ozzie Osmond said:
Note that from 2017/18 there will be an additional nil rate band for the family home over and above the usual £325k.
As I understand it, the nil rate band in a situation like this is doubled to £650000 (£325000 for the mother's estate and £325000 for the father's estate. Will the new extra £100000 for a family home take it to a total of £750000 or £850000?

Jockman

17,912 posts

159 months

Friday 21st October 2016
quotequote all
brrapp said:
Ozzie Osmond said:
Note that from 2017/18 there will be an additional nil rate band for the family home over and above the usual £325k.
As I understand it, the nil rate band in a situation like this is doubled to £650000 (£325000 for the mother's estate and £325000 for the father's estate. Will the new extra £100000 for a family home take it to a total of £750000 or £850000?
To qualify you need children - important point as many will not benefit from the RNRB. In this case it's ok.

Thereafter, my understanding is that it's tapered to 2020 when it will be a full £350k (2 x £175k) on top of the £650k.

It is then reduced above a £1m value to zero effectively at £1.7m.

Jockman

17,912 posts

159 months

Friday 21st October 2016
quotequote all
Also be careful of deprivation of assets if she needs to go into a care home.

Ozzie Osmond

21,189 posts

245 months

Friday 21st October 2016
quotequote all
Jockman said:
It is then reduced above a £1m value to zero effectively at £1.7m.
Which is handy - when a decent house in London costs more than £1.7m.....

Jockman

17,912 posts

159 months

Friday 21st October 2016
quotequote all
Ozzie Osmond said:
Which is handy - when a decent house in London costs more than £1.7m.....
You can buy an estate up here for that wink

Trabi601

4,865 posts

94 months

Friday 21st October 2016
quotequote all
Jockman said:
Also be careful of deprivation of assets if she needs to go into a care home.
So long as there is no current reason to suspect she will need care in the future, there is no deliberate deprivation.

Councils may try to claim there is - but this kind of case has been successfully fought and won many times.

Jockman

17,912 posts

159 months

Friday 21st October 2016
quotequote all
Trabi601 said:
Jockman said:
Also be careful of deprivation of assets if she needs to go into a care home.
So long as there is no current reason to suspect she will need care in the future, there is no deliberate deprivation.

Councils may try to claim there is - but this kind of case has been successfully fought and won many times.
Seriously?

I'm led to believe my Council will look at records as far back as six years !!!

Trabi601

4,865 posts

94 months

Friday 21st October 2016
quotequote all
Jockman said:
Trabi601 said:
Jockman said:
Also be careful of deprivation of assets if she needs to go into a care home.
So long as there is no current reason to suspect she will need care in the future, there is no deliberate deprivation.

Councils may try to claim there is - but this kind of case has been successfully fought and won many times.
Seriously?

I'm led to believe my Council will look at records as far back as six years !!!
They will, But they have to prove that it was part of a plan to avoid care home fees.

If the person making the gift was of sound mind and good health at the time of signing assets over, then they cannot chase for them.

However, if the person making the gift knew of an illness that would require them to be cared for in a home as it progressed, then it would be deprivation and the council could chase for it.

Many people will roll over and pay up without a fight, though.

uknick

879 posts

183 months

Saturday 22nd October 2016
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Trabi601 said:
So long as there is no current reason to suspect she will need care in the future, there is no deliberate deprivation.

Councils may try to claim there is - but this kind of case has been successfully fought and won many times.
Do you have any links where this has happened?

Trabi601

4,865 posts

94 months

Saturday 22nd October 2016
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There's a guide on the Age UK website.

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets...

Welshbeef

49,633 posts

197 months

Sunday 23rd October 2016
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Trabi601 said:
They will, But they have to prove that it was part of a plan to avoid care home fees.

If the person making the gift was of sound mind and good health at the time of signing assets over, then they cannot chase for them.

However, if the person making the gift knew of an illness that would require them to be cared for in a home as it progressed, then it would be deprivation and the council could chase for it.

Many people will roll over and pay up without a fight, though.
But really if you have money and then gift it to avoid home care costs that's not on it's not right that general taxation should pay for your needs if you have the ability to pay yourself. Man up pay up and don't be greedy in respect of INheritsnce.

We want a fair society and those who have money should use it all up that's fair for the general good of the nation.

55palfers

5,892 posts

163 months

Sunday 23rd October 2016
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Welshbeef said:
But really if you have money and then gift it to avoid home care costs that's not on it's not right that general taxation should pay for your needs if you have the ability to pay yourself. Man up pay up and don't be greedy in respect of INheritsnce.

We want a fair society and those who have money should use it all up that's fair for the general good of the nation.
Quite.

This person's £38K of taxpayers money doesn't grow on trees does it.

Trabi601

4,865 posts

94 months

Sunday 23rd October 2016
quotequote all
Welshbeef said:
But really if you have money and then gift it to avoid home care costs that's not on it's not right that general taxation should pay for your needs if you have the ability to pay yourself. Man up pay up and don't be greedy in respect of INheritsnce.

We want a fair society and those who have money should use it all up that's fair for the general good of the nation.
But if you have no expectation that you'll need to go into a care home, why shouldn't you assist your children by gifting them assets / money whilst you're able to see them enjoy it?

My mum helped us clear the last of our mortgage - it gave her great pleasure seeing us mortgage free and able to do other stuff to enjoy ourselves whilst healthy enough to do so. Should she have not done that, just in case she needed to go into care? (As it happened, she never did go into care before her death).

Ozzie Osmond

21,189 posts

245 months

Sunday 23rd October 2016
quotequote all
Trabi601 said:
But if you have no expectation that you'll need to go into a care home, why shouldn't you assist your children by gifting them assets / money whilst you're able to see them enjoy it?
I think it would be a challenge for an 86-year old to make the case they genuinely believe they'll never need care.

If they're wealthy there's nothing wrong with giving some of it away. But if they're rolling in money they wouldn't usually choose their house as the first item to gift. Albeit that if they are rolling in money and give away the house they will at least be able to afford the market rent that needs to be paid.

Whilst I'm a keen fan of arranging things to minimise tax I'm not such a fan of giving stuff away so that other people have to support you. By all means give away what you can afford to give away - that's prudent IHT planning. But I'd rather people didn't try to give it all away and fall back on the state.