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bigduckontax, Accountant
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If I sell my house and gift the money to my daughter and she

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If I sell my house and gift the money to my daughter and she then uses the money to buy a house in which we both live. Would I avoid paying inheritance tax if I live beyond another 7 years?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly, a flippant answer, 'Yes!' When you sell your sole or main domestic residence you are entitled to Private Residence Relief (PRR) which relieves Capital Gains Tax (CGT) at 100% and is given automatically. The UK has no Gifts Tax regime, just thank your lucky stars you don't live in France where gifts tax kicks in at 5K Euros! The gift of money to your daughter does, however, impinge on your Inheritance Tax (IHT) position. A gift of this magnitude would create a Potentially Exempt Transfer (PET) om your IHT account. PETs run off at a taper over seven years and in the event of your decease within this period are added back to your estate for IHT purposes. PETs are the first to suffer IHT and in the event of your estate being insufficient to meet the tax on the PET the liability cascades down to the beneficiary for immediate settlement. The classic defence against a PET is, of course, a decreasing term life insurance policy. In any event CGT does not start until an estate reaches 325K and is at 40% flat rate on the surplus. The 325K limit is inflated by any inter spousal or charitable bequests. So there you have it, a quick canter through the taxation maze as it would affect your proposal. Your original surmise was correct; live 7 years from the gift and you are all out of the taxation wood ahead of the Jabberwock. I do hope that you have found my reply of assistance and helped set your mind at rest.
Customer: replied 1 year ago.
Thankyou. How would I document that as a gift?
You do not actually have to do that formally. Gifts are one of the questions on the Probate Form which the executors or administrators of your estate would have to complete in the unfortunate event of your demise. A note left with your will would guide them. Please be so kind as to rate me before you leave the Just Answer site.
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