My mother-in-law is giving us her house.
Will we have to pay capital gains tax on it straight off or only if we sell it?
INANA, but you should only have to pay the tax only if you sell the house.
Here’s the Inland Revenue’s site on Capital Gains Tax:
I thought that CGT does not have to be paid on a house which is your primary residence. The tax is paid on second homes and also applies to people who own several houses and rent them out and them sell them.
You have to be living in the house for 3 years (primary residence) to avoid capital gains tax on selling the property. (If you own another property).
There are many different ways she could ‘give’ you the house though (inc. selling if first then presenting you with money in yearly tax-free instalments) to avoid major tax payments, but you would be best to speak to a financial adviser on the most profitable way for you and her to complete the transaction. This also depends on the time you have to deal and how much hassle you are willing to go though to save the 40% CGT.
How is she actually planning to give you the house?
Thanks MC.
Aro: I think she is going to change the deeds into our name?
The house is a gift. As such, you will not have to pay anything on it if she survives seven years and you keep it. If she doesn’t, there is a sliding scale.
Primary Residence can be as short as 6 months - you’ve just got to explain why.
You definitely need to get professional advice here.
I believe the seven year rule applies only as long as you can prove that you’re not trying to avoid paying capital gains tax.
Get professional advice.
My granddad gifted all his possessions (bar the house) to my mother and uncles. He got a book about how to do it to make it legal. He put labels on everything, and got a solicitor to witness it. “Now all I have to do is live for seven years,” he said. “I’ll do my best.” That was 15 years ago and he’s still going strong. 