tax implications when gifting property

[mrb]

We are considering moving into my wife's mother's house which is larger than ours. The intent would be to sell our existing property which is worth 2/3rds of my wife's mother's house, and she would gift us the final third so that we would not need to borrow more money. She would then move into a smaller house which would be left to the other 2 siblings of wife. My questions are: will we have to pay stamp duty on the full value of the house? Will we have an IHT liability on the gift if my wife's mother lives more than 7 years from the date of the gift?

[adelante]

Stamp duty YES
IHT after 7years NO

[Peter D]

SDLT is due on the consideration, i.e. the actual money paid for the property so the 2/3 you speak of. The other 1/3 if deemed as gift will attract IHT is there as and IHT issue within the 7 years. Who is buying the smaller house for Mum. I ask this because if you and your wife bought it and 'Rented' to Mum then the house value would no longer be in her estate. Clearly she would have the 2/3 house value in the bank and this plus the interest will pay the rent and slowly reduce her esate further. You should consider all these avenues including remortgaging your old home as a BtoL and using the funds pay the 2/3 to Mum in Law. I suggest this as it was your PPR and will remain free from CGT for 36 months then be offset by Letting Releif for a further 6 years or so. This generates an income after deduction of Remortgage interest and other maintenance expenses. You will, if done properly, be able to charge interest on a pro-rate basis up to the value of the property at first let Regards IR283 on the HMRC.gov.uk web site. Regards Peter