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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3827
Experience:  FCCA FCMA CGMA ACIS
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I am recently widowed and own the family home in Hackney

Customer Question

I am recently widowed and own the family home in Hackney outright. It is worth over a million, but I am not sure what to do about it. I am 70 now and need to move. . but where?
Also my sons have young famiies and could really use a boost financially.
I also own a bungalow in maidstone which was my Mother in laws. We have rented it out since 2002 and it is worth around £300,000 . .In 2002 it was worth about £175,000.
Granny bought it for £60,000 ion 1985.
I would like to sell this property and release the capital. i would gift this money to my sons, but how much would I lose in Capital gains tax.
Submitted: 8 months ago.
Category: Tax
Expert:  bigduckontax replied 8 months ago.

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

I assume that your London house is your sole or main domestic residence and that you intend to sell the Maidstone dwelling. Please confirm and advise if you ever lived in that house.

Customer: replied 8 months ago.
I never lived in the Maidstone house. We inherited it. The London house is my sole residence.
Expert:  bigduckontax replied 8 months ago.

Thank you, ***** ***** the probate value of granny's house, the 175K quoted?

Customer: replied 8 months ago.
Yikes! I am not sure. .I just know that we inherited it and the market price was around £175
Expert:  bigduckontax replied 8 months ago.

Ja is playing up tonight! Do you own granny's house jointly with your wife?

Customer: replied 8 months ago.
I owned it with my husband who passed away in September. His will left everything to me and I am the executor
Expert:  bigduckontax replied 8 months ago.

Oh, I am so sorry.

Your Capital Gains Tax (CGT) liability is 300K - 175K = 125K less your non cumulative Annual Exempt Amount (AEA) of 11.1K leaving 113.9K exposed to tax, but only half as your late husband's share of the 300K value will be included in his estate for Inheritance Tax (IHT) purposes, there being no CGT on death.. Your element will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. A worst case scenario is a tax bill of some 13K.

The gift to your children will create a Potentially Exempt Transfer (PET) in your IHT affairs. PETs run off at a taper over seven years and in the event of your demise are added back to your estate for IHT purposes. PETs are the first to suffer IHT and if the estate is insufficient to meet the tax on the PET the liability cascades down to the beneficiary for immediate payment. IHT kicks in at 325K, but from 2017 to 2020 this rises progressively to 500K for family homes left to children. There is also a possibility that you have inherited some or all of your late husband's 325K also.

I do hope that you have found my reply of some assistance.

Customer: replied 8 months ago.
Thanks for this answer, it seems I might not be taxed as much as I thought. I see I need to get assets to my kids asap because in 7 years I will be quite elderly. So thanks for this. I will put the house in Maidstone on the market very soon.
Expert:  bigduckontax replied 8 months ago.

Delighted to have been of assistance.

Please be so kind as to rate me before you leave the Just Answer site.

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