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Sam
Sam, Accountant
Category: Tax
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I would like to know what the position is on inheritance tax.

Resolved Question:

I would like to know what the position is on inheritance tax. I own our family home and this will be left equally to my two children. However, it had increased in price over the years and is now probably worth currently about £900,000, a large proportion of which I understand would be subject to inheritance tax. However, if I were to make the house over to my children would this prevent them from having to pay this tax. Also if I were to do this is it a difficult and/or expensive process?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question

First - any gift you were to make, would then have to see you survive 7 years for it to be NOT considered for Inheritance tax, and I assume this is your main home - so would not give rise to capital gains tax as a result of the transfer.

This would be known as a potentially exempt transfer.

All you would have would be legal costs to have the deeds changed to reflect the gifting and change of ownershipm which you do via land registry and would cost about £1000 (although a conveyancer can hanfdle this for you, but then you would have their fee on top of that)

However - if you continue to live here - then unless you pay market value rent to your sons - then the gift is treated as a gift with reservation - and this means that it is NOT disreagrded for Inheritance tax - no matter how much time passes, plus you could find you are liable to pre owned aset tax also.

So make sure if you proceed with this gifting that you do pay market value renmts to your sons.

Another option is to place the property in trust - again if this is currently your man resdience then no capital gains in placing this into trust, but you must make sure that you choose a trust that serves you well both short and long term, so do seek independent fiancial advise - but I have added a link here regardinmg the types of trusts there are and how they opeate and the tax positions for each.

https://www.gov.uk/trusts-taxes/overview

Let me know if I can be of any furtehr assistance

Thanks

Sam

Customer: replied 2 years ago.

My children currently live in the house and I am only resident their for part of the year. Does this make a difference.

Expert:  Sam replied 2 years ago.

Hi Susan

Thanks for your response

None at all for the Inheritance tax advise- as you will still benefit from it - and can then only spend the odd day for visits (HMRC state The original owner can make social visits and stay for short periods in a home they’ve given away) but as this may in fact be more than just the odd social visit, then I would suggest that you pay market value rent for the time that you do stay there

But you will then have the capital gain position to consider that will arise when you gift this property as it would then appear this is not your main residence and therefore capital gains will have to be considered.

Let me know if I can be of any further assistance with this matter.

Thanks

Sam

Customer: replied 2 years ago.

Don't understand the capital gains issue?

Expert:  Sam replied 2 years ago.

Hi

Thanks for your response

If you do not live here full time, then I assume you live elsewhere as your main residence

This being the case then when you gift/sell/tranfer a property that is not your main residence, then capital gains tax has to be considered.

Link here re capital gains https://www.gov.uk/tax-sell-property/what-you-pay-it-on

Let me know if you wish to to expand on this

Thanks

Sam

Customer: replied 2 years ago.

Even if this is in another country?

Expert:  Sam replied 2 years ago.

Hi Susan

What's in another country - the main residence or the property you plan to gift?

If its the property you plan to gift, are you a UK citizen? AS now this is determined by residency and your domicile position -and you did not mention any of this in your initial post.

When did you leave the UK and for the last 3 tax years how many days9approx) have you spent back in the UK

Were any of these days for work purposes

Thanks

Sam

Customer: replied 2 years ago.

My main residence is in Hungary and the property to be gifted is in the UK. I have lived there for the last 3 years during which time I have come back 3/4 weeks per year just to visit family, not work.

Expert:  Sam replied 2 years ago.

Hi Susan

Thanks for your response

Then you may well be exempt from UK capital gains on the basis of non resdiency and whilst you do not advise what your nationality is for me to establish your true citizenship and domicile position, I can advise that as long as this transfer takes place within a 5 tax year period whcih sees you treated as NOT resident in the UK (which certainly has been the case for the last 3 years as you have spent less than 91 days visiting the UK, none of which were for work purposes) then you will have NO UK capital gains, but should alert the Hungarain Tax authorties incase there is any tax position for them to consider.

I am sure you can appreciate we are UK tax experts so I cannot advsie further on the Hungarian tax position.

Let me know if you need any further advise on this matter, but in the meantime, it would be much appreciated, if you would rate the level of service I have provided (or click accept) as this ensures Just Answer credit me for my time.

Thanks

Sam

Let me

Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

I am British

Expert:  Sam replied 2 years ago.

Hi Susan

Tha snwwer remains the same - just make sure that this transfer is surrounded by a full 5 tax years of UK NON residency.

Which in essence means that if you were to transfer in the next couple of week, and had only mainated 3 tax yaesr of non resdiecny out of the UK, then you would need to achieve this tax year and one more full tax year so that the transfer has at least 5 tax years warpped around the transfer (same would apply to any sale of the property)

Thanks

Sam

Customer: replied 2 years ago.

Many thanks for your help. I have sent a rating

Expert:  Sam replied 2 years ago.

Hi Susan

You are welcome and thank you - this is much appreciated

Sam

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