Hi everybody. My first post on this message site and my final step before going to a solicitor as I can't make sense of our government's website re: CGT vs IHT in a gifting property scenario. I'm just going to explain my entire situation here in hope someone has been in similar experience or can make sense of the vague explanations on government websites.
My parents own a leasehold on a council flat bought back in '05 for approx. £120k. This flat is now worth £400k after two agencies valued it last week. It was lived in as a primary home for two years and we then moved out. It has been rented out since.
My parents want to 'gift' me this flat now but I also have £60k to give them and want to pay £500 to them each month, but both those payments are optional at this point. So what I'd like to know is how much approximately we're facing in each scenario.
Scenario 1:
Officially gift the flat to me by having parents change name to mine 100%. From what I've read on gov site, there'll be a CGT charge of 18 or 28% depending on income and nothing on IHT as long as parents remain alive for seven years. In such case, if I offer my 60k, do we only have to pay CGT on the gift amount (ie £340k)? And where does the 500 per month come into it, if at all?
Scenario 2:
Keep the flat in my parent's name. From what I understand, that just leaves IHT when the day comes. But I'm exempt up to £650k, right? Which leaves nothing to pay today, but with the flat value fast rising, it could be a small amount to pay in the far future - have I got that right?
Scenario 3:
This one I'm not sure about. I've heard my parents mention this could make a difference.
We keep the flat in my parents name for the next 3-5 years. Apparently having it as a property to live in and not renting it out means after 5-7 years, there's no CGT to pay. I haven't heard this to be honest - it's come from my parents. Is this accurate or absolute baloney?
Scenario 4:
This one could be baloney from me. If we arrange a handover of a certain percentage each year that's under the tax threshold, could we theoretically avoid paying CGT by the time it's 100% in my name?
I know these scenarios make me look a bit Panama, but I feel it's madness how much the government want a piece of the pie when we're only switching names between parents and son.
I hope someone can help! No problem if not - I'll speak to a solicitor, but just checking before I do.
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