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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4956
Experience:  FCCA FCMA CGMA ACIS
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I own flat from 2005.We ware leaving in the flat till 2009

Customer Question

Hi. I own flat from 2005.We ware leaving in the flat till 2009 then moved out.At present my daughter leaves there. I bought it for £163000 and the market value at present is £283000.I would like to gift it to my daughter.There is £120000 mortgage outstanding.My daughter is 23,full time employed and can afford the mortgage. Do I need to pay capital gains tax and how much is going to be?Is there are any way I can give her the flat without paying lots of money.Kind Regards
Submitted: 17 days ago.
Category: Tax
Expert:  bigduckontax replied 17 days ago.

Hello, I am one of the experts on Just Answer and pleased to be ablr to help you with your question.

Where do you live since you left in 2009, in your own house or in rented accommodation?

Customer: replied 17 days ago.
We bought another house and we moved there and we live there since.
Expert:  bigduckontax replied 17 days ago.

You will be liable for Capital Gains Tax (CGT) on the gain made on sale, but only for a proportion. The time spent between 2005 and 2009 plus the last 18 months of ownershi, when you are deemed to be in residence even if this is not the case, reduces your exposure to the tax.

Your total ownership time is 13 years. occupation time 5.5 years. 13 - 5.5 = 7.5 so 7.5 / 13 say 58% of the gain will be taxed. The gain is 28.3 - 16.3 = 12K and 58% of that is say 7K. As you have an Annual Exempt Amount (AEA) of 11.7K there will be no tax due on disposal, better than a poke in the eye with the proverbial sharp stick.

i do hope that I have been ab;e to set your mind at rest on this matter..

Customer: replied 17 days ago.
I forgot to mention that I am a higher earner.
Expert:  bigduckontax replied 17 days ago.

Does not make a jot of difference as no CGT is payable.

Customer: replied 17 days ago.
Do you mean 120K?
Expert:  bigduckontax replied 17 days ago.

Yes, sorry my error, 293K - 163K - 120K - 11.7K = 108.3K which would be taxed at 28% so a tad over 30.3K tax due. You question mentions 'we' so if this was held jointly then the exposure would be half each, say 54K, tax 15.1K making 30.2K total, a tiny saving.

Customer: replied 17 days ago.
Sorry is not joint ( me and my daughter).
Expert:  bigduckontax replied 17 days ago.

So you and you daughter own the house being sold, in what proportion?

Customer: replied 17 days ago.
No I am the only owner of the flat.
Expert:  bigduckontax replied 17 days ago.

So the CGT bill will be 30.3K.

The gift to your daughter will create a Potentially Exempt Transfer (PET) in your Inheritance Tax (IHT) affairs. PETs run off at a taper over 7 years and in the event of your death within this period will be added back to your estate for IHT purposes. PETs are the first to suffer IHT and if your estate is insufficient to meet the tax on the PET then tha liability cascades down to the beneficiary for immediate payment.

Customer: replied 17 days ago.
Sorry did I understood correct. Please correct me if not.
283K-163K =120K.I was living in the property for 4 years +18 months=5.5.So 7.5 tears and 58 % gain to be taxed =£69600-11700=57900.
57900x28/100=£16212 to be taxed(this is what I need to pay capital gains tax).
Expert:  bigduckontax replied 17 days ago.

Gain is 120K of which 58% is taxable ie 69.6 less AEA of 11.7 is 57.9 @ 28% = a tad over 16K of tax. I forgot to knock off the occupation time, sorry, it is getting late.

Customer: replied 17 days ago.
If I sell it to her for the 120000(the outstanding mortgage price) do I need to pay the same amount capital gains tax as I am giving her the property?
Expert:  bigduckontax replied 16 days ago.

Sorry, yes.

Customer: replied 16 days ago.
If after 2009 I rented a property,is the capital gains tax calculate the same way?
Expert:  bigduckontax replied 16 days ago.

Usually, I showed you how it can happen.