How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Sam Your Own Question

Sam
Sam, Accountant
Category: UK Tax
Satisfied Customers: 12852
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
16196420
Type Your UK Tax Question Here...
Sam is online now
A new question is answered every 9 seconds

Hi Me and my wife both brought a property about 5 years

Customer Question

Hi

Me and my wife both brought a property about 5 years ago before we met and we are not quite clear on what the tax implications are for us now if we sell one as we understand there are new rules around the sales of a second home.

Seperately, can you confirm that its okay for my partents to loan me an amount of money and that it would only be liable for inheritace tax if it becomes a gift?

Any advice greatfully recieved!

Thanks, Alex.
Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your question

 

Was this purchase 5 years ago in joint names, and did you ever live in it as your main residence?

 

The money you intend to get from your parents, is it a loan or a gift (will you have to pay it back?)

 

Thanks

 

Sam

Customer: replied 1 year ago.


Hi Sam and thankms for the quick response!


 


We both bought our properties in our own names and lived in them for several years. Let's call my property 'Property A' and my wife's 'Property B'.


 


 


In case its relevant, my wife bought Property B with a friend, who we subsequently brought out of her share, so that my name is XXXXX XXXXX the morgage of both Property A and B. Only my name is XXXXX XXXXX A.


 


We now live in Property B and rent property B. Hope that's clear!


 


Regading the money, it would be a loan but with no strict terms of repayment. Ultimately I am the only child so (barring a falling out!) I will inherit any money, but I hope that will be a long long time from now!


 


Let me know if you need anything else.


 


Thanks, Alex.

Expert:  Sam replied 1 year ago.

Hi Alex

 

Thanks for your responses

 

So Property A (yours) was bought what month and year, and when did you move out from property A? And is this property still in your sole name? When did the renting commence, and is this rental income declared to HMRC?

 

Property B is in your wifes name, and has always been her main residence, and you then moved in, is this property still in her sole name?

 

Now re the Inheritance tax situation, is the money being treated as a loan or a gift? This is very important for Inheritance tax purposes, regardless of whether you will be the sole inheritor in the future.

Are there documents drawn up that this is a loan, and is it your intention to pay it back?

 

Thanks


Sam

 

Customer: replied 1 year ago.


Hi Sma - my answers in line below


 


So Property A (yours) was bought what month and year, and when did you move out from property A?


 


Approx Dec 2008. We moved out around 18 months ago.


 


 


And is this property still in your sole name?


 


Yes


 


When did the renting commence, and is this rental income declared to HMRC?


 


About six months afterwards and no, not yet.


 


 


 


Property B is in your wifes name, and has always been her main residence, and you then moved in, is this property still in her sole name?


 


No as I say we bought out her friend and we are now jointly on the mortage of this property


 


 


 


Now re the Inheritance tax situation, is the money being treated as a loan or a gift? This is very important for Inheritance tax purposes, regardless of whether you will be the sole inheritor in the future.


 


I think this is the question I'm asking you :) If I understand correctly a loan does not have tax implications where as a gift does. I am willing and able to pay the loan back but my partents would not be in any rush for me to do so. We can draw up documentation if it helps.


 


 


Are there documents drawn up that this is a loan, and is it your intention to pay it back?

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your response

 

I'm very confused about property B - it was in your wifes name and her friend, and she lived here and then you and your wife bought her friend out, and its now in joint names, and this is where you have lived since 18 months ago, so it had been your wifes main residence at the purchase date, from (month/year) to (month/year) when she moved in with you, then you both moved out of your property into your wifes original property - the reason I ask as there could be capital gain implications on this property when this is sold, so if you wish to to review the position, could you provide the details asked for.

 

However, for you, with your property, as its been less than 3 years since you moved out, and up to 18 months ago it had been your only and main residence, then as long as you sell within the next 18 months, there will be no capital gain implications, as the time you live in a property plus the last 36 months of ownership are covered under the private residence relief rules.

If however, the sale date takes place more than 36 months after moving out, then there will be a capital gain consideration. But this will be reduced by the private residence relief rules (the time you lived there and the last 36 months of ownership) and also (as long as the rental income is declared to HMRC) private lettings relief, which can allow up to a further £40,000 exemption.

 

 

However you must rectify the non declaration of rental income as soon as possible.

 

Now onto the Inheritance tax position, if it is in fact a loan and you have documents drawn up and a payment plan (or some sort) then as long as this is paid back by the time the will is read, then there are no further concerns. Because although you are sole inheritor, if this loan is not paid back by the time the Inheritance tax position is reviewed, then you will owe a debt to the estate, and whether you have to pay this (just to then have it paid back!!) is a legal matter that you will have to establish.

 

However if its a gift (which in my humble opinion, I believe it to be so) then your parents have to survive more than 7 years, for it then to be disregarded for Inheritance tax purposes. If they survive less than 7 years, then this amount has to be added back into the estate- which only creates a problem if each parents estate is worth more than £325,000. (so all assets and money etc)

 

Do feel free to ask any follow up questions, but it would be appreciated if you could rate the level of service I have provided, as it ensures I am paid.

 

 

Thanks


Sam

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12852
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and 5 other UK Tax Specialists are ready to help you
Customer: replied 1 year ago.


Hi sam - did you recieve my follow up answers to your e-mail above?


 


I am quite happy to pay more if this is what has stopped the flow?

Expert:  Sam replied 1 year ago.

Hi

 

The last posting (prior to this one now) was mine, so do feel free to ask a further follow up question, and there is no need to post it as a new question (Unless is a brand new topic)

 

Thanks

 

Sam

Customer: replied 1 year ago.

How strange but thanks for coming back quickly. I have in fact rather sneakily asked two questions on the same thread (I did not know how it worked) and so will pay you accordingly once we are finished.


 


Please see my answers in-line below.


 


I'm very confused about property B - it was in your wifes name and her friend, and she lived here and then you and your wife bought her friend out, and its now in joint names, and this is where you have lived since 18 months ago,


 


yes all correct


 


 


so it had been your wifes main residence at the purchase date, from (approx Jan 09) to (approx 3 years ago) when she moved in with you,


 


 


then you both moved out of your property into your wifes original property


 


 


correct


 


- the reason I ask as there could be capital gain implications on this property when this is sold, so if you wish to to review the position, could you provide the details asked for.


 


 


Is it strictly necessary to note the date she moved in with me as she was still paying the mortgage on her property...we could say she just lived at hers until I moved in?


 


However, for you, with your property, as its been less than 3 years since you moved out, and up to 18 months ago it had been your only and main residence, then as long as you sell within the next 18 months, there will be no capital gain implications, as the time you live in a property plus the last 36 months of ownership are covered under the private residence relief rules.


 


 


This is clear - thank you.


 


 


On the IHT I think I understand. For full transparency it is a loan in the sense that I can and will pay it back should they ever need it but not if they don't - but seems like as long as the survive the next 7 years it does not really matter if its a gift or a loan?

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for reposting the missing follow ups - I am not sure what happened either, but lets look at each of these in turn.


So we are all agreed with the position regarding the property that you own, that has been rented out, and what capital gains position sits here.

 

With your wifes property, no you cannot say it was her main residence throughout, as clearly it was not (as you indicated that you both lived at your property for a period of time, so please advise the history of her living in her property from date of purchase to current date, so I can advise both of your capital gain positions for any future sale of this property.

 

And on the IHT note, yes it does matter whether its a gift or a loan, even if they do not survive more than 7 years - this must be established now, and with documents to back this up (letter of agreement/notice of gift) between your parents and you.

Although the financial position may remain the same with any IHT consideration, matters must be put in place to reflect the facts for legal purposes.

 

Thanks


Sam

 

Customer: replied 1 year ago.


I actually don't know when she moved in to be honest - I suspect about 3 years ago but not even sure how we would go about dating it. Does it makes a difference that she moved out for only 18 months and then moved back in again?


 


Understood regarding the IHT - I think I am clear on this point now, so thnaks.

Expert:  Sam replied 1 year ago.

Hi Alex

 

Thanks for your response

 

Yes it does matter than she moved out and then in again, as this forms part of the consideration as to whether capital gains will arise when the property is sold. However if the property sees no further absences (and it was just 18 months) and it remains your main residence right up to the point of sale, then it will not have any overall affect,and the sale will remain exempt from capital gains just be mindful that if you move elsewhere and sell later after this time, then seek further advise at that time.

 

Thanks

 

Sam

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
< Last | Next >
  • http://ww2.justanswer.com/uploads/baktax/2009-7-15_202414_Frame.jpg Andrew Baker(baktax)'s Avatar

    Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
  • http://ww2.justanswer.com/uploads/teap007/2009-01-10_145815_bill_justanswer_for_profile.jpg TEAP007's Avatar

    TEAP007

    Tax Preparer

    Satisfied Customers:

    754
    Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years
  • http://ww2.justanswer.com/uploads/BE/berduchwal/2011-6-7_84817_pict0854.64x64.jpg berduchwal's Avatar

    berduchwal

    Accountant

    Satisfied Customers:

    669
    Qualified accountant and bookkeeper running my own practice since 2008.
  • http://ww2.justanswer.com/uploads/JO/Josh2010/2012-4-29_19490_GettyImages80121770B.64x64.jpg Joshua's Avatar

    Joshua

    Lawyer

    Satisfied Customers:

    61
    LL.B (Hons), Higher Prof. Dip. Law & Practice
  • http://ww2.justanswer.com/uploads/RO/Ronaann/2012-3-19_23343_SSL22629.64x64.JPG Mrs-Tax's Avatar

    Mrs-Tax

    Tax Adviser

    Satisfied Customers:

    59
    Law Degree, 19 years in UK Tax.
  • http://ww2.justanswer.com/uploads/TG/TGraham12/2012-7-17_81212_bigstockBusinessHandshake508163.64x64.jpg Thomas's Avatar

    Thomas

    Solicitor

    Satisfied Customers:

    48
    Exposure to general tax issues
  • http://ww2.justanswer.com/uploads/struppiaml/2009-10-9_95150_anthony_business_002.jpg AnthonyL's Avatar

    AnthonyL

    Tax Adviser

    Satisfied Customers:

    19
    ATT, ATII, 12 years tax experience