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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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i am buying my parents home, my mother was willing to sell

Resolved Question:

i am buying my parents home, my mother was willing to sell the house to me for 100K but i decided to mortgage for the full value of the home 150k, and have her use or transfer me the difference to me for home improvements ( loft conversion etc ).
will the 50k be taxed either gift or inheritance?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

hello and welcome to the site. Thank you for your question.

As your mother is selling the property to a connected person (i.e. her son) for capital gains purposes the selling price would be the market value of the property and not the discounted price you pay her. You may find this article helpful . see link here

http://www.thisismoney.co.uk/money/experts/article-1709917/Can-we-sell-our-son-a-flat-on-the-cheap.html

In your example, £50k would be a gift to you and for inheritance tax purposes regarded as a potentially exempt transfer and the seven years rule would apply.

If your mother survives for 7 years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.

More information on this can be found here

http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm#4

Recipient of the gift receives the money free of tax. So you would not pay any direct tax on the gift of £50k on receipt of it.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

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Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.

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