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bigduckontax
bigduckontax, Accountant
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I want to gift my property to a friend I bought this in 1997

Resolved Question:

I want to gift my property to a friend
I bought this in 1997 for £99000 and have let it since then
the value now is £500000
will there be a capital gains tax payable
Submitted: 10 months ago.
Category: Tax
Expert:  bigduckontax replied 10 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

To what sort of property are you referring? If it is landed property is it your sole or main domestic residence?

Customer: replied 10 months ago.
this is a residential property which I have let since I bought in 1997
Expert:  bigduckontax replied 10 months ago.

There will be a Capital Gains Tax (CGT) liability. Please confirm if you ever lived in the relevant property.

Customer: replied 10 months ago.
no I have not lived at this property
Customer: replied 10 months ago.
waiting for your reply
Expert:  bigduckontax replied 10 months ago.

Your gain is 500K - 99K = 401K. From this deduct your non cumulative Annual Exempt Amount (AEA) of 11.1K leaves 389.9K exposed to CGT. This will be levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of disposal. A worst case scenario is a tax bill of a tad under 110K.

The gain is reduced by purchase costs and selling costs including advertising and any improvements made eg installation of double glazing, central heating and extensions, but not routine maintenance which is allowable against rental income.

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Expert:  bigduckontax replied 10 months ago.

Your notional gain is 500K - 99K = 401K. From this deduct your non cumulative Annual Exempt Amount (AEA) of 11.1K leaves 389.9K exposed to CGT. This will be levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of disposal. A worst case scenario is a tax bill of a tad under 110K.

The gain is reduced by purchase costs and selling costs including advertising and any improvements made eg installation of double glazing, central heating and extensions, but not routine maintenance which is allowable against rental income.

Giving it to your friend has Inheritance Tax (IHT) problems as a Potentially Exempt Transfer (PET) is created. PETs run off at a taper over seven years and in the event of your demise within the period are added back to your estate for IHT purposes. PETs re the first to suffer IHT and if the deceased's estate i inadequate to meet the IHT on the PET the liability cascades down to the beneficiary for immediate payment.

Thank you for your support.

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