This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

IHT and CGT liability on "sort of" second property

akrot1
Posts:2
Joined:Wed Aug 17, 2022 3:23 pm
IHT and CGT liability on "sort of" second property

Postby akrot1 » Wed Aug 17, 2022 3:29 pm

Hi - really hope someone with more knowledge than I am is able to help me on this subject please which I'm helping an older family member with. I've tried to be as clear as possible with the situation and ask the right questions but please feel free to ask clarifying questions if any more information is needed.


June 2014: Person A purchases property X for 230K in June 2014 and lives in it as their sole property in London. Person A works in London too.



December 2014: Person A purchases property Z with new husband in East Anglia. Person A’s name is on the deeds on this property and they own half the property each. Person A moves to live in East Anglia as their main residence and continues to work there. Purchase price of this property Z is 280K.



December 2014: Property X in London is lived in by Person A’s daughter (Person B) rent free. Person A visits monthly and stays at Property X on a recurring basis for next few years.



June 2021: Person B moves out of Property X in London and property is vacant apart from a monthly visit for a few days at a time by Person A.



May 2022: Person A sells their share of property Z in East Anglia to her husband. Property Z is valued at this time at 380K and Person A is removed from the deeds. Person A alone had spent 6K on a porch & new bathroom at property Z.



September 2022 (tbc): Person A plans to sell property X in London for 305K (they have spent 6K upgrading kitchen and bathroom) and together with proceeds of this sale plus proceeds of sale of property Z in East Anglia, purchase a new property Y for 515K in London which will be their second home for another few years until Person A moves to London eventually on more of a permanent basis.



q. 1 What tax (including rate) is due (if any) by Person A on her sale of her share of property Z

q. 2 What tax (including rate) is due by Person A on proposed sale of property X

q. 3 What tax (including rate) is due (if any) on purchase of Property Y

q. 4 What tax (including the rate) should Person A have paid on purchase of Property Z in December 2014.

q. 5 Are there any ways to mitigate any of the tax due or are there any potential changes to Person A’s circumstances which would reduce the amount of tax due.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: IHT and CGT liability on "sort of" second property

Postby bd6759 » Wed Aug 17, 2022 10:13 pm

1) None. No tax on spousal transfers

2) capital gains tax on the gain, less a small amount of residence relief. Rate is 18% or 28% depending on income.

3) and 4). No tax on purchases.

5) Possibly give share of x to spouse before selling.

akrot1
Posts:2
Joined:Wed Aug 17, 2022 3:23 pm

Re: IHT and CGT liability on "sort of" second property

Postby akrot1 » Wed Aug 17, 2022 10:22 pm

Thanks for the swift response - I thought SDLT was payable on purchases so I was slightly surprised at your response for Q3&4. Given the circumstances I wasn't sure what rate of SDLT was due.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: IHT and CGT liability on "sort of" second property

Postby bd6759 » Wed Aug 17, 2022 10:42 pm

Presumed conveyancer paid SDLT. But you are right. The inter spouse transfer will also be liable to SDLT.
Google SDLT calculator to get figures.


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”