Interaction of capital gains and inheritance tax

Interaction of capital gains and inheritance tax

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My client has a property that she lives in and another that she lets.  The two properties bring her estate to approximately £650,000.  She would like to give the let property to her two sons and feels that she should escape IHT as this would be a PET.  I think that she would pay tax on the gain when she gave the property away.  Am I right?

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By cathygrimmer
06th Oct 2011 14:34

Yes

A gift to her sons would be treated as a market value sale - triggering a taxable capital gain if the property is standing at a profit since acquisition. It might be possible to put the let property into trust without an IHT liability (if the value is less than the Nil Rate Band) and hold over the gain - but that would only defer the capital gain, not eliminate it.

Has she 'inherited' a husband's Nil Rate Band? If she has, it might be better to hang on to the property and get the tax-free uplift for CGT purposes on death. Of course, it depends why she wants to give it to her sons.

Don't forget SDLT if there is a mortgage on the property.

Cathy

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By roseorgan.fsbdial
07th Oct 2011 14:08

Thank you

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