Hello and welcome to the site. Thank you for your question.As I understand from your statement, you have three questions:(1) I have been advised that if I give my half share to my cousin I will have to pay a large capital gains tax bill.(2) Would it be exactly the same as if we sold the property?(3) If I have the property to him and paid a capital gains tax bill and died within the next 7 years would the value still be added to my estate and eligible for inheritance tax thus causing me to be taxed twice?I will respond in this order(1) If you were to give/transfer your share of the property to you cousin, it will trigger a chargeable gain as you never had the property as your main residenec albeit you lived in it for some 18 months.The gain will be difference between the probate value at time of death and the current value .. so your share of the gain will be (142,500-50,000)=£92,500.You would claim your gains allowance against it and the rest will be charged at CGT rate of 18%, 28% or a combination of both depending on your total income in the year of sale/transfer. Worst scenario is a CGT of (92,500-11,100)=81,400 x 28% £27,792
I have assumed the property value was £100,000 when you got half share of it and that £100,000 was not the value of your half share. CGT tax would be different on this figure.
(2) CGT would be the same whether you sold the property or gifted it to your cousin.(3) CGT and IHT are two separate taxes. If you were to gift property to your cousin it would be regarded as a potentially exempt transfer and the seven year rule applies. The gift would be the value of your share of the property less CGT suffered on transfer.
I hope this is helpful and answers your question.
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The valuation at my mothers date of death 2Feb 1999 was 125000(half share £62500) but was not transferred into my name at land registry until 12 December 2001 when it was valued at £200000 (half share £100000) as shown on the title. Which figure would be used?
Having paid the capital gains tax on transfer,there could be in heritance tax payable on the valuation at transfer less the capital gains tax paid if I died within 3 years. Is my understanding correct?
I think it makes sense for me to leave the property in joint names and bequeath my half share to my cousin hoping that by the time this happens government will have raised inheritance tax thresholds to a more realistic level.