My mom died in 2004 and left me her flat. Initially I rented it out, however now my son lives in it whilst my husband and I reside in our personal space.
When I die, will the children have to pay capital gains tax on the flat when they promote it to percentage the worth? I assume we’re secure with inheritance tax as each homes in combination are value about £700,000.
Is there any means to keep away from CGT? Would or not it’s higher, as an example, for me to promote the flat now?
Mrs H. S., Berkshire.
Looking forward: One mom needs to know whether or not her children can be lumped with CGT in long term (inventory symbol)
Tony replies: I put your query to Richard Morley, tax dispute answer spouse at accounting company BDO.
He informed me that so long as you continue to personal the flat for your sole identify and your children inherit it from you, for tax functions, they’ll achieve it at its price at your loss of life. So, in the event that they promote it in a while afterwards, any capital acquire will have to be inside their annual exemptions (£11,700 every).
In distinction, if you happen to give them the valuables now, you are going to pay capital gains tax calculated as if you happen to had offered it at marketplace price.
‘If the flat and your other assets not passing to your husband are worth less than your inheritance tax [IHT] nil-rate band — currently £325,000 — when you die, your children will inherit it free from IHT,’ says Mr Morley.
‘In addition, if your husband dies leaving everything to you, both properties could pass to your children tax-free.’
Mr Morley issues out that in addition to inheriting your husband’s IHT nil-rate band, you each have a first-rate place of dwelling nil-band that may observe when passing your major house to direct descendants.
‘For couples where the second death occurs in 2020/21 or later tax years, this can exempt up to £1 million in assets passing to their children. But do make sure your wills are properly drafted so your family benefits from these tax reliefs,’ he says.
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