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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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This may be a strange question, but here goes... My

Resolved Question:

Hi,
This may be a strange question, but here goes...
My father died over a year ago and my mother has found it so hard to live in the house they had together. My father asked me if I would be happy to let my mother have my house if she found it difficult, as they both wanted to have it when the got older, which I agreed to in principle.
To make it simple my house is worth £250,000 so if i sold her my house for a half share in her house worth £500,000 and she gave me the second half as a gift what would the TAX implications to myself (of course paying Stamp Duty on the whole amount totalling £15,000 at the present rate) or would it make more sense to co-own the property and she wills me the second half and my house back at a later date?
I hope you can help,
Many thanks,
Richard
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
Or if you have any better ideas I would be more than happy to hear them...Thanks,
Richard
Expert:  TonyTax replied 1 year ago.
Hi. If you "sell" your house to your mother for £250,000, the paper gain that you make will be tax free assuming that the property has been your main home for the entire period of ownership and for a maximum of 18 months after you move out if you do so before you sell it. The same would apply to your mother's paper gain on the swap element and the gift element as far as her property is concerned. As far as the gift element is concerned, this would be a potentially exempt transfer for Inheritance Tax purposes which would fall out of her estate so long as she lives for seven years after making it, though the potential IHT charge does taper away from three years after the gift is made. Take a look here for more information on taper relief. If you co-own your mother's property, then the half she will own at her death will definitely be included in her estate for IHT purposes at that time, though the allowance for the passing of the family home which you can read about here may reduce the IHT exposure. The rules are complex and won't come into force until 6 April 2017. Whether her estate will be subject to IHT or not will be based on her estate's value and how much, if any, of your late father's nil-rate band will be available to her estate when she dies. Take a look here for more information on that. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Hi,So it would make sense to buy half her home by selling mine to her and the other half to be a gift, which may or may not be taxed depending on the 7 year rule, understand it drops after 3 years and then subsequently up to the 7th year.But there would be no immediate tax implications to either of us unless one of us dies before the 7 years are up?Many thanks,
Richard
Customer: replied 1 year ago.
By immediate tax implications I mean capital gains or inheritance (7 year rule withstanding)
Expert:  TonyTax replied 1 year ago.
Your understanding of my answer is correct.
Customer: replied 1 year ago.
Well sounds like you have answered my question and just one more clarification, I have lived in the house for 15 years so has been my main residence since 2000 but on my understanding I could move out to another property, while still owning it, but the transaction must be completed 18 months after that move similarly my mother must adhere to the same rule?Many thanks
Richard
Expert:  TonyTax replied 1 year ago.
That's correct.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you so much for all your help, I'm so happy that I can get on with this,
and thank you from my mum, I'm sure it will mean a lot to her!Many thanks again,
Richard
Expert:  TonyTax replied 1 year ago.
Thanks and good luck.

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