Inheritance tax
Discussion
Hello,
My mother and I jointly own the house she lives in. It was bought for £350k and is now worth £600k.
If she were to die, can someone tell me please what the inheritance tax would be?
I live with my husband in London, but would it make a difference if I elected mum's property as my principal private residence?
thanks
My mother and I jointly own the house she lives in. It was bought for £350k and is now worth £600k.
If she were to die, can someone tell me please what the inheritance tax would be?
I live with my husband in London, but would it make a difference if I elected mum's property as my principal private residence?
thanks
jadesb said:
Hello,
My mother and I jointly own the house she lives in. It was bought for £350k and is now worth £600k.
If she were to die, can someone tell me please what the inheritance tax would be?
I live with my husband in London, but would it make a difference if I elected mum's property as my principal private residence?
thanks
Her half of the house is worth less than the inheritance tax threshold & so assuming she has no other sizeable assets the answser is nil.My mother and I jointly own the house she lives in. It was bought for £350k and is now worth £600k.
If she were to die, can someone tell me please what the inheritance tax would be?
I live with my husband in London, but would it make a difference if I elected mum's property as my principal private residence?
thanks
You living in the house (or not) makes no difference to IHT - but it would affect capital gains on your half if sold before she died or the whole after you had inherited her half.
If it is not your principle residence you would pay CGT on the gain when you sell it. On your half you will pay 18% of the gain. Not sure how your mother's half would be treated in respect of CGT if you sold it after you had inherited - but I would think the base/cost value from a tax perspective on that half would be the probate value - i.e. what the place was valued at at the point you inherited it so you would pay CGT on the sale price less the probate value on her half.
If you move into the house and live there & it becomes your primary residence then of course you can sell it (in due course) tax free. Don't know how long you have to live there for before you can sell it but its more than a week! Don't mess with HMRC on this one, you need to live in the house properly for a reasonable amount of time & it needs to be your registered address for everything (banks, utilities, electoral register, tax etc etc).
In fact, HMRC has no absolute time limits which you have to meet to satisfy the Main Residence criteria. You can successfully claim a property was your Main Residnce without EVER having lived there. The main point you have to prove is INTENT to live there.
I had a client who bought a house in which he and his wife intended to live. However, before they could move in, his work posted him abroad for three years. Whilst abroad, the house he had bought was rented out. Also, whilst abroad, he started a family. When he returned, he and his wife decided they needed a bigger house so they put the old house on the market and lived in rented accomodation for a few months. The house was sold without them ever living in it. BUT, as far as HMRC were concerned, they had no problem accepting the gact that the original house was their UK Main Residence and therefore was not chargeable to CGT.
I had a client who bought a house in which he and his wife intended to live. However, before they could move in, his work posted him abroad for three years. Whilst abroad, the house he had bought was rented out. Also, whilst abroad, he started a family. When he returned, he and his wife decided they needed a bigger house so they put the old house on the market and lived in rented accomodation for a few months. The house was sold without them ever living in it. BUT, as far as HMRC were concerned, they had no problem accepting the gact that the original house was their UK Main Residence and therefore was not chargeable to CGT.
Tiggsy said:
How do you own half of it? If it was all owned by your mum and she gave you half (for example) and you dont live there then the IHt value may be all hers.
So...where do YOU live? there or not?
And how did it come to be half owned by you?
Thanks to all for the responses far.So...where do YOU live? there or not?
And how did it come to be half owned by you?
I own half of it because I paid for half of it, and both our names are on the deed.
Based on what Iain said it seems the IHT is nil, and based on Eric's answer re PPR the CGT should also be reduceable
jadesb said:
Tiggsy said:
How do you own half of it? If it was all owned by your mum and she gave you half (for example) and you dont live there then the IHt value may be all hers.
So...where do YOU live? there or not?
And how did it come to be half owned by you?
Thanks to all for the responses far.So...where do YOU live? there or not?
And how did it come to be half owned by you?
I own half of it because I paid for half of it, and both our names are on the deed.
Based on what Iain said it seems the IHT is nil, and based on Eric's answer re PPR the CGT should also be reduceable
How do you hold it - tenants in common or joint tenants? You should have been advised on the difference when it was purchased. The deeds don't say directly; you can only infer from other entries on the title.
If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
SJobson said:
How do you hold it - tenants in common or joint tenants? You should have been advised on the difference when it was purchased. The deeds don't say directly; you can only infer from other entries on the title.
If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
The freehold deed is in both our names. Not sure what this tells me about the "tenancy"?If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
jadesb said:
SJobson said:
How do you hold it - tenants in common or joint tenants? You should have been advised on the difference when it was purchased. The deeds don't say directly; you can only infer from other entries on the title.
If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
The freehold deed is in both our names. Not sure what this tells me about the "tenancy"?If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
You should have been advised by the solicitors who acted at the time you acquired it. Look back to them.
SJobson said:
jadesb said:
SJobson said:
How do you hold it - tenants in common or joint tenants? You should have been advised on the difference when it was purchased. The deeds don't say directly; you can only infer from other entries on the title.
If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
The freehold deed is in both our names. Not sure what this tells me about the "tenancy"?If joint tenants, then on her death you automatically become sole owner - the property does not form part of her estate. If tenants in common, her half forms part of her estate and will be dealt with in accordance with her will.
You should have been advised by the solicitors who acted at the time you acquired it. Look back to them.
So her estate would be £600k value/2 = £300k + £100k assets = £400k. Since IHT is at £325k, I suppose that means we have to pay IHT on £75k.
If I sell the property immediately afterwards, what happens to CGT on my £300k share? Can I reduce that by electing the house as my PPR from now on (it was bought in 2003).
thanks!
If you actually live there, you can elect to have it as your PPR from the date you moved in - plus the 3 years extra that is always given opn the PPR. However, your original home that you own on your own loses its PPR status from the date the shared house becomes your PPR. This means that this other property will be liable to CGT if and when sold. You have to do the sums to work out which is the best option.
Deva Link said:
How does HMRC know which is your PPR - is it down to the solicitor acting for you when you sell to tell them?
How do they know anything? Most information on file at HMRC is supplied by the taxpayer or a third party - such as a bank or employer.You tell them. It's a crimninal offence not to do so.
Edited by Eric Mc on Tuesday 16th February 11:03
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