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Peter
Peter, Chartered Tax Advisor
Category: Finance
Satisfied Customers: 151
Experience:  Director at PDS Tax Limited
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I'm wondering if I pay off a mortgage of a house I own and

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Hi I'm wondering if I pay off a mortgage of a house I own and then transfer to my Mum, will I be liable for Capital Gains Tax?
JA: What are the assets or property for this capital gain?
Customer: It's a property that was bought for £185,000 by myself 23 months ago
JA: Anything else you want the Accountant to know before I connect you?
Customer: I also have another property which I bought before this one

Hi, my name is ***** ***** I am a chartered tax advisor. What would you estimate is the current market value of the house?

Kind regards, Peter

Customer: replied 4 months ago.
Hi Peter, so actually my question has changed a bit. My mum's house has actually gone down by £3,000. We paid £177,000 and it's now showing on Zoopla for £174,000. I think what I meant to ask was about capital gains on my property. I bought that in 2012 for £185,000 and it's now on the market for £325,000. I lived in it from summer 2012 until October 2014 and since then up until mid-July 2019, I've had people in there renting. If this property sells will I be liable for Captial Gains tax? Basically, I am trying to get everything sorted with transferring my Mum's and then selling mine to buy a home with my partner so want to work out what kind of deposit I might have. Thanks

Thanks for the additional detail. I will give this some thought and get back to you later today.

Ok, so I understand you will be paying off your let property mortgage, selling your let property to your mother, and using the cash received from her you will be buying a new property with your partner. Please let me know if my understanding is incorrect.

You will be subject to capital gains tax on the transfer to your mother regardless of what she gives you in return because for capital gains tax purposes you are connected with her. Even if you gifted it to her for nothing you would still be subject to CGT on its market value.

I attach a very rough indicative calculation of the gain you may incur based on many assumptions and estimations (I accept no liability for inaccuracy! If you need figures to rely on you will need to engage formally with an accountant).

From April 2020 the lettings relief will be taken away and the final period exemption will be reduced from 18 months to 9 months. Therefore if you were to transfer the property after 6 April 2020 the tax charge would be considerably bigger.

If you have any follow up questions, I am happy to help. Otherwise please consider a 5 star rating for my answer.

Kind regards, Peter

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Customer: replied 4 months ago.
Great thanks Peter, this is incredibly helpful - thanks so much. It's actually the other property that I will transfer to my mother and this one I just sell to another owner, but I think everything you've said applies still and it's good to know the amount I can plan for. Will leave you a 5 star review right now!