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bigduckontax, Accountant
Category: Tax
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My wife and I own a second property which we wish to gift to

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my wife and I own a second property which we wish to gift to our daughter who lives in it. clearly the disposal of the property will trigger a capital gains tax liability as the property has gained over £100,00 in value since purchase. as the property is in joint names presumably we will each be liable for half of the tax, in my case my tax rate is 40%. my wife pays very little tax so will have much of her annual tax allowance available to cover her share. can you give me an indication of how much we might have to pay. thank you
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly, a gift will create a Potentially Exempt Transfer (PET) in your Inheritance tax (IHT) affairs. PETs run off at a taper over seven years and in the event of a decease within that period are added back to the estate for IHT purposes. PETs are the first to suffer IHT and if the estate is insufficient to meet the IHT on the PET it cascades down to the beneficiary for immediate payment. IHT kicks in at 325K, excluding any inter spousal and charitable bequests, and is at a 40% flat rate. The classic defence against IHT on the PET is a reducing term life insurance policy on the life of donor. Your question says a GBP 10000 gain; I assume you mean 100K and will proceed on that premise. Each of you is liable for half so that is 50K each. Each is entitled to the non cumulative Annual Exempt Amount (AEA) currently 11.1K to offset this. Furthermore, if your daughter has been paying a rental you may well get Lettings Relief (LR) up to 40K depending on the rent received. CGT is levied at 18% or 28% or a combination of the rates depending on the individuals' income including the gain in the tax year of sale. A rough and ready estimate of CGT due, ignoring LR, would be a tad under 11K for you and some 7K for your wife. I do hope that you find my reply of some assistance.
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Thank you for your support.
I am sorry I have misled you; you can only get LR if you have occupied this house either before or after the letting period. Fortunately my reply ignored LR.