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bigduckontax, Accountant
Category: Tax
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I recently received a lump sum gift from my Mother, I want

to purchase a property with... Show More
to purchase a property with it and am considering allowing her to live in the property. Do I need to pay income tax or any kind of tax for allowing my Mother to live there?
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Hello, I'm Keith and happy to help you with your question.

Gifts are outside the scope of UK taxation so there is no problem there.

If you buy a house and allow your mother to live there unless it is your sole or main domestic residence and you reside there also you may well be liable for Capital Gains Tax (CGT) on its disposal at some future undetermined date. You do not incur any tax liability just for letting your mother live in your property.

CGT is a thoroughly nasty tax which has the habit of popping up when one least expects it with serious financial consequences. It is also extremely complicated and its full ramifications are well beyond the scope of your question.

Customer reply replied 3 years ago.

Thanks, XXXXX XXXXX question, so just to confirm the house will be my main residence. Does having my Mother live there increase the capital gains I will pay when I decide to sell? The house is only worth 130,000 if that makes any difference.

If you are living there then on the ultimate sale will still be liable to CGT on the gain made, but you would be entitled to Private Residence Relief which is at 100% of any gain and so eliminates it for CGT. Se what I mean about CGT being a thoroughly nasty tax?

If you are living there then presence of your mother is totally and utterly irrelevant.
Thank you for your excellent support.
Customer reply replied 3 years ago.

Thank you for your previous answers, I feel I need to give you additional information to help clarify .........

The money I will be using to purchase this property was a gift from my Mother (she is ill and wanted me to have her assets), my final question relates to what I saw on HMRC's website regarding 'income tax and pre- owned assets'. Would this be applicable in this case, and if so, what rate would we be liable to pay?

No, but what you tell me does change the situation somewhat should your mother's estate in the event of an unfortunate early death exceed 325K. Please come back yo me if this is a possibility.
Customer reply replied 3 years ago.

Thank you, I am completely satisfied with your answer again, 325,000 will not be the case.

Excellent, then we do not have to worry about Potentially Exempt Transfers; frightfully boring.