My mum owns two homes.
a) First home bought in 1990
b) Second home bought in 1998
The second home was elected as the PRR in 2006.
Following the passing of my late father my mother is considering selling one or both homes. For the sake of IHT and CGT what is here position on the properties in terms of gains and legitimately avoiding tax bearing in mind property inflation peaked in 2007, having risen for 10 to 15 years before.
What is the best solution to selling one or both homes?
Thanks
Wouldn't it be advantageous with some creative tax planning to pass on a proportion of one or both of these houses to you and your siblings thus avoiding IHT (subject to other conditions).
Thoughts please.
No, I am not an accountant but used to be in Financial Services before retiring. There is some overlap.
Yes it should have been 4, but, as I said it should be calculated in months and not years and yes it is regarded by HMRC as a straight-line calculation.
You can do the calculation on the other property in the same way. You can count any period of residence of single ownership and nomination when 2 or more are owned, and also the last 3 year. However, you can't count the same period twice on the same property. In other words, ignore the last 3 years bit for a property if she had nominated that property for PRR at the time.
If she does decide to sell both, she should make sure that she completes the sales in different tax years in order to get 2 annual allowances.
Mike
MikeGG1 thanks for response and advice much appreciated. Are you a qualified tax accountant?
The gain is seen as a straight line by HMRC ignoring property price cycles during the period of ownership?
Also, would it not be a fraction of 4/23 of gain? (23 - 16 - 3 = 4yrs)?
I assume with the second property that that has 8 yrs of gain (1998 to 2006) or 8/15 of the gain over the 15 yrs of ownership?
There is a possibility that my mother would sell both homes to downsize and buy another property (and distribute some money to her four children and 8 grand children) as she now beginning to spend more time in property one (the one she bought first with my late father in 1990) because property two was going to be used as a retirement place with my late father, but when he passed on she decided that she will probably move back to property once to be close to her family sadly.
Thanks
Chris
I would sell the first home.
Out of the 23 years of ownership, she would have PRR for the first 16 years and the last 3, so only 3/23 of the gain less £10,800 annual allowance.
The fraction is actually calculated in months, so do your own figures and don't forget to add the cost of buying to the original price and the costs of selliing should come off the selling price.
Mike
Forgot to mention that both properties were in joint tenant names of my mother and late father and my fathers 50% share passed directly to my mother when he moved in in January 2011.
Wouldn't it be advantageous with some creative tax planning to pass on a proportion of one or both of these houses to you and your siblings thus avoiding IHT (subject to other conditions).
Thoughts please.
No, I am not an accountant but used to be in Financial Services before retiring. There is some overlap.
Yes it should have been 4, but, as I said it should be calculated in months and not years and yes it is regarded by HMRC as a straight-line calculation.
You can do the calculation on the other property in the same way. You can count any period of residence of single ownership and nomination when 2 or more are owned, and also the last 3 year. However, you can't count the same period twice on the same property. In other words, ignore the last 3 years bit for a property if she had nominated that property for PRR at the time.
If she does decide to sell both, she should make sure that she completes the sales in different tax years in order to get 2 annual allowances.
Mike
MikeGG1 thanks for response and advice much appreciated. Are you a qualified tax accountant?
The gain is seen as a straight line by HMRC ignoring property price cycles during the period of ownership?
Also, would it not be a fraction of 4/23 of gain? (23 - 16 - 3 = 4yrs)?
I assume with the second property that that has 8 yrs of gain (1998 to 2006) or 8/15 of the gain over the 15 yrs of ownership?
There is a possibility that my mother would sell both homes to downsize and buy another property (and distribute some money to her four children and 8 grand children) as she now beginning to spend more time in property one (the one she bought first with my late father in 1990) because property two was going to be used as a retirement place with my late father, but when he passed on she decided that she will probably move back to property once to be close to her family sadly.
Thanks
Chris
I would sell the first home.
Out of the 23 years of ownership, she would have PRR for the first 16 years and the last 3, so only 3/23 of the gain less £10,800 annual allowance.
The fraction is actually calculated in months, so do your own figures and don't forget to add the cost of buying to the original price and the costs of selliing should come off the selling price.
Mike
Forgot to mention that both properties were in joint tenant names of my mother and late father and my fathers 50% share passed directly to my mother when he moved in in January 2011.
Forgot to mention that both properties were in joint tenant names of my mother and late father and my fathers 50% share passed directly to my mother when he moved in in January 2011.
I would sell the first home.
Out of the 23 years of ownership, she would have PRR for the first 16 years and the last 3, so only 3/23 of the gain less £10,800 annual allowance.
The fraction is actually calculated in months, so do your own figures and don't forget to add the cost of buying to the original price and the costs of selliing should come off the selling price.
Mike
MikeGG1 thanks for response and advice much appreciated. Are you a qualified tax accountant?
The gain is seen as a straight line by HMRC ignoring property price cycles during the period of ownership?
Also, would it not be a fraction of 4/23 of gain? (23 - 16 - 3 = 4yrs)?
I assume with the second property that that has 8 yrs of gain (1998 to 2006) or 8/15 of the gain over the 15 yrs of ownership?
There is a possibility that my mother would sell both homes to downsize and buy another property (and distribute some money to her four children and 8 grand children) as she now beginning to spend more time in property one (the one she bought first with my late father in 1990) because property two was going to be used as a retirement place with my late father, but when he passed on she decided that she will probably move back to property once to be close to her family sadly.
Thanks
Chris
No, I am not an accountant but used to be in Financial Services before retiring. There is some overlap.
Yes it should have been 4, but, as I said it should be calculated in months and not years and yes it is regarded by HMRC as a straight-line calculation.
You can do the calculation on the other property in the same way. You can count any period of residence of single ownership and nomination when 2 or more are owned, and also the last 3 year. However, you can't count the same period twice on the same property. In other words, ignore the last 3 years bit for a property if she had nominated that property for PRR at the time.
If she does decide to sell both, she should make sure that she completes the sales in different tax years in order to get 2 annual allowances.
Mike
Wouldn't it be advantageous with some creative tax planning to pass on a proportion of one or both of these houses to you and your siblings thus avoiding IHT (subject to other conditions).
Thoughts please.
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Property CGT and PRR with ownership of two homes.
My mum owns two homes. a) First home bought in 1990 b) Second home bought in 1998 The second home was elected as the PRR in 2006. Following the passing of my late father my mother is considering selling one or both homes. For the sake of IHT and CGT what is here position on the properties in terms of gains and legitimately avoiding tax bearing in mind property inflation peaked in 2007, having risen for 10 to 15 years before. What is the best solution to selling one or both homes? Thanks
Answers
chrispies
,17 January 2013
,Lovemoney.com
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Answers
Wouldn't it be advantageous with some creative tax planning to pass on a proportion of one or both of these houses to you and your siblings thus avoiding IHT (subject to other conditions). Thoughts please.
No, I am not an accountant but used to be in Financial Services before retiring. There is some overlap. Yes it should have been 4, but, as I said it should be calculated in months and not years and yes it is regarded by HMRC as a straight-line calculation. You can do the calculation on the other property in the same way. You can count any period of residence of single ownership and nomination when 2 or more are owned, and also the last 3 year. However, you can't count the same period twice on the same property. In other words, ignore the last 3 years bit for a property if she had nominated that property for PRR at the time. If she does decide to sell both, she should make sure that she completes the sales in different tax years in order to get 2 annual allowances. Mike
MikeGG1 thanks for response and advice much appreciated. Are you a qualified tax accountant? The gain is seen as a straight line by HMRC ignoring property price cycles during the period of ownership? Also, would it not be a fraction of 4/23 of gain? (23 - 16 - 3 = 4yrs)? I assume with the second property that that has 8 yrs of gain (1998 to 2006) or 8/15 of the gain over the 15 yrs of ownership? There is a possibility that my mother would sell both homes to downsize and buy another property (and distribute some money to her four children and 8 grand children) as she now beginning to spend more time in property one (the one she bought first with my late father in 1990) because property two was going to be used as a retirement place with my late father, but when he passed on she decided that she will probably move back to property once to be close to her family sadly. Thanks Chris
I would sell the first home. Out of the 23 years of ownership, she would have PRR for the first 16 years and the last 3, so only 3/23 of the gain less £10,800 annual allowance. The fraction is actually calculated in months, so do your own figures and don't forget to add the cost of buying to the original price and the costs of selliing should come off the selling price. Mike
Forgot to mention that both properties were in joint tenant names of my mother and late father and my fathers 50% share passed directly to my mother when he moved in in January 2011.
Wouldn't it be advantageous with some creative tax planning to pass on a proportion of one or both of these houses to you and your siblings thus avoiding IHT (subject to other conditions). Thoughts please.
No, I am not an accountant but used to be in Financial Services before retiring. There is some overlap. Yes it should have been 4, but, as I said it should be calculated in months and not years and yes it is regarded by HMRC as a straight-line calculation. You can do the calculation on the other property in the same way. You can count any period of residence of single ownership and nomination when 2 or more are owned, and also the last 3 year. However, you can't count the same period twice on the same property. In other words, ignore the last 3 years bit for a property if she had nominated that property for PRR at the time. If she does decide to sell both, she should make sure that she completes the sales in different tax years in order to get 2 annual allowances. Mike
MikeGG1 thanks for response and advice much appreciated. Are you a qualified tax accountant? The gain is seen as a straight line by HMRC ignoring property price cycles during the period of ownership? Also, would it not be a fraction of 4/23 of gain? (23 - 16 - 3 = 4yrs)? I assume with the second property that that has 8 yrs of gain (1998 to 2006) or 8/15 of the gain over the 15 yrs of ownership? There is a possibility that my mother would sell both homes to downsize and buy another property (and distribute some money to her four children and 8 grand children) as she now beginning to spend more time in property one (the one she bought first with my late father in 1990) because property two was going to be used as a retirement place with my late father, but when he passed on she decided that she will probably move back to property once to be close to her family sadly. Thanks Chris
I would sell the first home. Out of the 23 years of ownership, she would have PRR for the first 16 years and the last 3, so only 3/23 of the gain less £10,800 annual allowance. The fraction is actually calculated in months, so do your own figures and don't forget to add the cost of buying to the original price and the costs of selliing should come off the selling price. Mike
Forgot to mention that both properties were in joint tenant names of my mother and late father and my fathers 50% share passed directly to my mother when he moved in in January 2011.
Forgot to mention that both properties were in joint tenant names of my mother and late father and my fathers 50% share passed directly to my mother when he moved in in January 2011.
I would sell the first home. Out of the 23 years of ownership, she would have PRR for the first 16 years and the last 3, so only 3/23 of the gain less £10,800 annual allowance. The fraction is actually calculated in months, so do your own figures and don't forget to add the cost of buying to the original price and the costs of selliing should come off the selling price. Mike
MikeGG1 thanks for response and advice much appreciated. Are you a qualified tax accountant? The gain is seen as a straight line by HMRC ignoring property price cycles during the period of ownership? Also, would it not be a fraction of 4/23 of gain? (23 - 16 - 3 = 4yrs)? I assume with the second property that that has 8 yrs of gain (1998 to 2006) or 8/15 of the gain over the 15 yrs of ownership? There is a possibility that my mother would sell both homes to downsize and buy another property (and distribute some money to her four children and 8 grand children) as she now beginning to spend more time in property one (the one she bought first with my late father in 1990) because property two was going to be used as a retirement place with my late father, but when he passed on she decided that she will probably move back to property once to be close to her family sadly. Thanks Chris
No, I am not an accountant but used to be in Financial Services before retiring. There is some overlap. Yes it should have been 4, but, as I said it should be calculated in months and not years and yes it is regarded by HMRC as a straight-line calculation. You can do the calculation on the other property in the same way. You can count any period of residence of single ownership and nomination when 2 or more are owned, and also the last 3 year. However, you can't count the same period twice on the same property. In other words, ignore the last 3 years bit for a property if she had nominated that property for PRR at the time. If she does decide to sell both, she should make sure that she completes the sales in different tax years in order to get 2 annual allowances. Mike
Wouldn't it be advantageous with some creative tax planning to pass on a proportion of one or both of these houses to you and your siblings thus avoiding IHT (subject to other conditions). Thoughts please.