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bigduckontax, Accountant
Category: Tax
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Four years ago i bought a residential property for £150k which

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Four years ago i bought a residential property for £150k which i have since rented out to one of my daughters. The daughter wants me to GIVE her the property NOW, its worth about £190k. Will i have to pay CGT on the difference between £150k and £190k? Will this Gift of £190k be added to my Estate for IHT during the next 7 years?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You will be liable for CGT on the property you propose to give to your daughter. Your gain is say 40K, but take of the non cumulative Annual Exempt Amount (AEA) of 11.1K leaves 28.9K exposed to CGT. As you never occupied the property you are not entitled to Lettings Relief (LR). The gain will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. A worst case scenario is a tax bill of some 8K. The 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 your decease within that period are added back to your estate for IHT purposes. PETs are the first to suffer IHT and if your estate is insufficient to meet the IHT on the PET the liability cascades down to the beneficiary for immediate payment. The classic defence against tax on the PET is, of course, a reducing term life insurance policy. I do hope that you find my reply of assistance.
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Thank you for your excellent support.