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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5147
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My mum lives in a property valued at £110k with £52k still

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My mum lives in a property valued at £110k with £52k still owed to the mortgage company. She pays interest only and as she has no way to pay off the mortgage my wife and I are going to buy out the remaining mortgage taking an equal share of ownership in the £52k part. My mum will therefore own the remainder. If my mum was to gift the remainder to me as I understand it she will not be liable for CGT as it is her sole residence she is disposing of. What will be my position regarding CGT when the time comes to sell? Her assets will be no where near the IHT threshold including the gift. Thanks, Jim
Hello and welcome to the site. Thank you for your question.

Your question concerns position of CGT when you come to sell the property in due course.

Your cost price would effectively be say £110k ...the market value of the property at the time of transfer made up of your contribution to redeem the mortgage plus the gift to you. Your gain would be based on selling price less this valuation and this amount would be chargeable to CGT after gains annual allowance.

As far as your mum is concerned, the amount gifted would be regarded as a potentially exempt transfer and fall within seven year rule for inheritance tax purposes. The fact her estate including the gift would be below the threshold for IHT purposes, there are no tax implications for her.
Customer: replied 3 years ago.

Hi and thanks for your reply. Just to clarify, my wife would have ownership equivalent to £26k and my ownership would be the remainder, (110k-26k), so would we each have CGT based on these numbers? Thanks, Jim.

Jim, thank you for your reply and clarification.

As you would own the property jointly with your wife, you would both be entitled to capital gains allowance in your own right. Say you make a profit of £30k. ...the chargeable gain would be 30-(2x11) = £8k and each owner bears CGT on £4k.

I hope this helps. and other Tax Specialists are ready to help you
I thank you for accepting my answer.

Best wishes.