Capital gains tax tips on family gifted property?

Capital gains tax tips on family gifted property?

16:29 PM, 10th May 2021, About 3 years ago 23

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My wife has a part-time job earning 12,000. Her mother signed over her house in 2002 giving half to my wife’s sister and half to my wife.

My wife’s mother died in February, and they decided to sell the house. My wife’s mother was living there all the time apart from the last six months she moved into my wife’s sisters house, and she died at that house. My wife’s sister was their mothers registered carer and did not have a job.

The property is valued at £1.8 million.

For the last six months we were rewiring and insulating all external walls with 70 mm insulation to bring the property up to a lettable state because it has had no building work or anything done to it for 50 years.

Has anyone got any tips on things we can do to reduce the capital gains we would have to pay?

Thank you


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Tim Rogers

9:32 AM, 11th May 2021, About 3 years ago

There are much wiser heads than mine on this site when it comes to tax matters, but you might like to look at placing things inside a trust.


9:33 AM, 11th May 2021, About 3 years ago

Are you also looking at the IHT implications of the gift to you wife? As mother in law still lived in the property it will fall back in to her estate, if she wasn't paying a market value rent for her continued occupation.

Chris Bradley

10:08 AM, 11th May 2021, About 3 years ago

This will depend on if the deceased was paying full market rent, if not it was a gift with reservation of interest and therfore not exempt from inheritance tax. The property essential was a life interest trust and should have been valued at the time of death for the estate. If the deceased was paying full market rent was it being declared and taxed as yearly income.


10:09 AM, 11th May 2021, About 3 years ago

If your wife's mother died in February in fiscal 2020/21 then it is worth considering whether both your wife and your sister were caring for her. As it is now May it is unlikely that you have sent in your tax returns for the fiscal year just gone. Your incomes may also have been reduced in that year due to Covid. So you may wish to consider whether the estate owes your wife and your sister in law any remuneration for the 2020/21 year and if so, that will need to be declared on their tax returns.


10:43 AM, 11th May 2021, About 3 years ago

Unfortunately the time to take the tax advice was when the property was gifted, there is very little you can do now.


11:48 AM, 11th May 2021, About 3 years ago

Get first class legal advice!

Hargreaves Consultants

12:13 PM, 11th May 2021, About 3 years ago

Use an expert accountant who knows what they are doing. I have just had similar circumstances to yours and my accountant reduced the amount of tax due to a very small amount.

Thomas Ryan

13:08 PM, 11th May 2021, About 3 years ago

Thank you everyone for your advice would that mean if it is in my mother-in-law‘s estate said it doesn’t belong to my wife and her sister has 5050 owners we have a old will and are now in the process of clearing the house and will be looking through paperwork to see if there is an up-to-date well as far as both sisters know there isn’t a up-to-date will and I assume that means Instead of paying 28% capital gains we will pay the 40% inheritance tax any ideas how we can reduce inheritance tax thank you Tom Ryan

Chris Bradley

14:03 PM, 11th May 2021, About 3 years ago

There are certain allowances against inheritance tax. I would suggest you either do lots of research if you intend to handle the probate paperwork yourself or see advice from a probate accountant. I did probate myself on both my parents estates but it's a huge learning curve and if you are not competent at dealing with the complexity of the rules you will loose out

Paul Shears

14:31 PM, 11th May 2021, About 3 years ago

Reply to the comment left by Chris Bradley at 11/05/2021 - 14:03
I have just finished dealing with probate on the very simplest of estates after over nine months work. The only people that were remotely competent were the inland revenue (Yes really!).
The bottom line is that the probate (dis)-service in England has collapsed. You have, in practice, no means of holding these people to account and the escalation process is a complete waste of time even if you pursue it to the end.

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