Parents want to gift sister and I a house

Parents want to gift sister and I a house

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BucksFizz

Original Poster:

203 posts

175 months

Sunday 26th January 2020
quotequote all
I suspect I may need professional legal advice for this but I’m hoping so posters can point me in the right direction.

My parents are 66 and have second house worth £180k with no mortgage, they want to gift it to my sister and I.

How do they do this/who do they need to speak with, and are there any tax implications other than the 7-year tax inheritance rule which could potentially occur if the worst happens?

Secondly, once the house is legally in mine and my sisters name, we want to rent it out and share the income. If the tenant pays me direct, and I then send my sister 50%, will I just need to declare the 50% on my self-assessment or are HMRC going to want me to declare all of it?

The reason being I am a higher rate tax payer and my sister is not, so I’d be paying 40% both shares.

markiii

3,649 posts

195 months

Sunday 26th January 2020
quotequote all
IMHO

to take your questions in revere

I do similar with regards to splitting our BTL income between us for tax purposes. We simply put a not in the text field on teh self assesment that we are splitting 50/50 and quote the other NI number. To date its worked fine.

So far as the gift I beleive its just the 7 year rule you need to worry about

2Btoo

3,436 posts

204 months

Sunday 26th January 2020
quotequote all
Been there, done that.

As has been said, you declare the income on your tax return. If you have 50:50 ownership then split all figures (income and costs) in two and put them on the two tax returns with a note in the notes field.

However as far as the ownership thing goes, make sure you have written down what is happening and what you are signing up to. And I mean EVERYTHING; just because you are family doesn't mean that everyone has the same understanding, less still that they will stick to it. I've learned that lesson the hard way and it's not a good one.

BucksFizz

Original Poster:

203 posts

175 months

Sunday 26th January 2020
quotequote all
Thanks guys.

Just to add a bit more detail, my parents bought the house for £140k as a BTL (no mortgage though). They want to sell up now and give my sister and I the money which in truth would be the easiest and most preferred option.

However, its been on market for 9 months without a single offer and now they just want rid, reducing the price is the obvious answer but they've got it into their minds to gift it to us both and so it's no longer on their plate.

Truth be told I don't mind the idea of renting it out, as I have been a landlord in the past so I know what I'm getting into. I just want to do it in the most tax efficient way possible.

Having a google, I believe my parents will need to pay capital gains tax on the value the property has increased by (approximately £40k) minus any allowance? What if I then decide to sell in 18 months time, do I have to pay CGT? If someone could advise further on this then that would be great.

Cheib

23,312 posts

176 months

Sunday 26th January 2020
quotequote all
They have to pay CGT as you say and you would on any gain over £180k (divided between your sister and you)...you get circa £10k of CGT allowance when you crystallise the gain.

I think but am not sure you may have to pay Stamp Duty on the “purchase price” of the home. If it’s second property it will be higher.

Sheepshanks

32,901 posts

120 months

Sunday 26th January 2020
quotequote all
Broad brush - please check details for your situation:

There would be CGT at its current value but if it's had no interest at all at £180K then it's not worth £180K. If parents jointly own the house they can combine their CGT allowance so a value of around £160K would mean no CGT.

I don't think there's any stamp duty as no money is changing hands and it's not mortgaged.


eliot

11,465 posts

255 months

Sunday 26th January 2020
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Worth knowing that the tax payable tapers down over the 7 years. Also the tax is payable from the estate of the deceased (via probate) - rather than yourself.

BucksFizz

Original Poster:

203 posts

175 months

Friday 31st January 2020
quotequote all
Thanks guys.

Is it just a case of using a conveyancer to transfer the house legally, and then my parents can declare any capital gains tax on self assessment should it be needed?

Skyedriver

17,965 posts

283 months

Friday 31st January 2020
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Whenever I read this thread title I recall a (now deceased) colleague whose Mother split he house in her Will, 25% to him as he'd done well in life and 75% to his Sister who hadn't.
Every week he'd say he was going over to cut a quarter of the front lawn.

BucksFizz

Original Poster:

203 posts

175 months

Friday 31st January 2020
quotequote all
I'd like to think my parents wouldn't do that to me, but it's the very reason why I don't discuss money with family.

My sister gets enough preferential treatment from my parents without them knowing I earn over twice what she does.