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taxadvisor.uk
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 own a flat with my mother. She owns 80%, I own 20%. There

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I own a flat with my mother. She owns 80%, I own 20%. There is no mortgage on the flat. We have let the flat for the past 2.5 years. Now my mum is looking to live in the flat and have it as her main residence. In the future my mum may choose to sell the flat and instead buy something closer to where I live. The money she'll get for the flat will be used to buy her a new residence (i.e. no profit and no money for me). I do not want her to have to pay some of that money in tax because of my 20% share and my income level (which partly is in the 40% bracket), so I am looking to gift my 20% to her for no money. What tax will I be liable to if I gift her my share? And will that tax be more or less than if I keep my 20% and she sells the flat? Thank you.
Submitted: 9 months ago.
Category: Tax
Expert:  taxadvisor.uk replied 9 months ago.
Thank you for your question.. If you gift her your share of the property, then you are deemed to have transferred the property at market value for CGT puposes and your gain would be chargeable to CGT at 28% as you are a higher rate tax payer and it is your second home.Your rate of tax for CGT purposes is likely to be the same whether you transfer it now or realise gain on sale of flat . If there is further gain from now in the future, then CGT payable in absolute terms would be higher. 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.
Customer: replied 9 months ago.
Thank you, ***** ***** helpful. Just to confirm I got it; if I gift her my share of 20% for no money (or we sell and I receive no money), I still have to pay 28% tax on the market value of my 20% share? So really no point in transferring it to her - it will just add solicitor fees. I assume she will not have to pay any tax on her 80% share as it is her residence and she has no income?I'm not sure I fully understand what you mean by "If there is further gain from now in the future, then CGT payable in absolute terms would be higher"?What would be the CGT if I was in the lower tax bracket of 20%?Many thanks again
Expert:  taxadvisor.uk replied 9 months ago.
Thank you for your reply..Let me clarify this for you..You will pay tax CGT at 28% on your share of the gain made since you first purchased the property and not 28% on the market value.For CGT purposes, you are deemed to have transferred your share to your mum at market value e.g.cost price when first bought say £50k (this is your share of total purchase price)market value at time of transfer/gift £75k (20% of the market value of property)gain is (£75k-£50k) = £25kThis gain less gains annual allowance is chargeable to CGT at 28%. As far as your mum is concerned, once she moves into the flat and makes it her main residence then the period covered as main residence would be exempt from CGT because of private residence relief. She may have to pay some CGT if PRR and letting relief does not cover the gain made.More information on private residence relief and letting relief can be found herehttps://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2016 [Q]I'm not sure I fully understand what you mean by "If there is further gain from now in the future, then CGT payable in absolute terms would be higher"?[A]This was in response to whether you transfer 20% now or give her the money when she sells the flat.. in my above example I assume your share of the market value now as £75k. Say you decide to gift your share of property proceeds when the flat is sold and your share then is £100k, there would be additional tax payable -- tax on £50k and not £25k. If your taxable income including the gain was at basic rate of 20%, then CGT would be calculated at 18%. I hope this is helpful and answers your question.I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4794
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Customer: replied 9 months ago.
Thank you, ***** ***** very helpful. So I think whether or not I decide to transfer her the 20% now or later depends on when we sell and how much the market value will have changed by then.
Expert:  taxadvisor.uk replied 9 months ago.
I thank you for accepting my answer. Best wishes

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