I bought a house for £37,000 in March 1997 and lived there for 18 months but due to work reasons I had to relocate. It has been on rent since October 1999.
My wife bought a house in the new place and we had been living there since March 1999.
Now the cost of my house is £95,000. The mortgage is a private mortgage on the house as we intend to live there. I do not intend to sell the house for next 10 yrs. But want to do some planning now to minimize the tax liability.
I had been thinking of the following options:
1. Gift the house to my mother. She does not have any assets and does not have any taxable income. In future we can inherit the house at the later date.
2. Add my mother as a beneficiary so the CGT gains can be divided as and when we will sell the house.
3. Add my wife (she has current house own her name) and my mother as a beneficiary and thus reducing the liability further.
I do not know whether any of the above options will attract the CGT. Please advise ?
I have done the very rough calculations on my CGT
Net CGT = 95,000 - 37,000 * (1 +index let us assume .05) = £56,000
Relief:
I lived in the house for 1.5 yrs and 3 yrs Private relief. So net propotionate CGT will be (4.5/6 (total period since I bought the house).
Net CGT after relief = 56000*1.5/6 = £14000
My CGT allownace is 2*7,700 = £15,400.
So according to my calculations I do not have to pay the CGT if I excercise any of the above three options.
Please could you advise:
1. Which of the option is the best to minimize the future tax liability.
2. Does my CGT calculation especially the relief are correct.
I shall be grateful to the person who can spare his valuable time to answer my doubts.
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