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bigduckontax, Accountant
Category: Tax
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I own a freehold property and have let the mother and

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I own a freehold property and have let the mother and farther of my old girl friend to live in the property rent free for life since 1998 under a deed of trust, The farther has since died and i have let their daughter move in rent free for the rest of their lives, I am thinking of gifting the property to my daughter will i incur any tax's if so which tax. Ed ***********Will fall under A GIFT WITH RESERVATION OF BENEFIT, of will i pay tax on the diff from purchase price and todays valuation

Hello, I'm Keith and happy to help you with your question.
Please advise if this is your own property; do you reside there or elsewhere?
Customer: replied 3 years ago.

Hi Keith,

I have had the property valued and i am waiting on the report but expect it to fall well under the £325k IHT threshold.


Thank you Ed, but you have still to tell me:
1. Do you reside there too? If so do you intend to remain in residence after a transfer of title to others.
2. Do you own any other landed property?
Without this information I cannot move forward with you question.
Customer: replied 3 years ago.


I do not reside in the property had do not intend to, i own my own house.


The gift to your daughter is a disposal by you for Capital Gains Tax (CGT) purposes and you will be liable for that tax on any gain made. The gain can be computed by taking the net sale valuation less the purchase price, plus costs and any improvements (eg installation of central heating, double glazing, extensions. the resulting balance is the gain which will be taxed (less your Annual Exempt Allowance of 11K) at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of transfer. As you are not retaining possession the gifts with reservation rules do not come into play.

If you wait until you die and bequeath it to her than your entire estate, including both houses, will be aggregated together along with everything else and be liable to Inheritance tax (IT). IT kicks in at 325K, plus any charitable and certain other bequests plus inter spousal transfers. The outstanding balance is charged at 40%, flat rate. If you gift to your daughter you create a Potentially Exempt Transfer (PET) in your IT account. PETs run off at a taper over 7 years and in the event of your demise within that time will be added back to your estate for IT purposes. If your estate is insufficient to meet the tax on the PET then that liability cascades down to the beneficiary for immediate payment. The classic protection is a reducing term life insurance policy.

bigduckontax and other Tax Specialists are ready to help you
Thank you for your support.
Customer: replied 3 years ago.

Thanks Keith - Ed.

Delighted to have been of assistance.
Customer: replied 3 years ago.


Can i transfer the property at the same price as i purchased so there is no CGT or do i have to transfer if at currant values, Because i am not making any capital gains? So why should i pay capital gains?


No Ed, the transfer must be made at current market value for CGT purposes. Unfortunately for you by making the transfer you have triggered a disposal for CGT purposes. The fact that you have not physically received a bean is irrelevant.
So sorry to have to rain on your parade.
Customer: replied 3 years ago.


Thanks for your advice, One can hope.

All the best Ed.

Thank you.