My Gran recently passed away and left everything to my mum. My mum has said she wants to give my Grans house to me as my girlfriend and I were looking after her for the last year of her life and is happy for me to sell it or rent it out or what not as I have already recently bought a house with my girlfriend so have no personal need for it. The hosue is not particularly sentimental as my Gran only moved in there in the last years of her life as she had to sell her old family home due to not being able to get up the stairs anymore. The thing is I am not sure about what to do as I think I would have to pay inheritance tax, which I know very little about. As its my mum that has technically inherited it and shes giving it to me would I need to pay this? Also if I sell it or rent it out would i need to pay income tax on what I get for it through purchase or rent? I currently earn 35k per year so am in the 20% tax bracket but if I were to sell it my income for this year would be huge and I would need to pay 40% tax right? I just used a Tax calculator and it says if I sold the house for 200k I would have to pay £90750 tax this year between that and my salary Surely that cant be right? Sorry, I know very little about tax, and Im not sure whether it is in my best interest to accept the property after looking into this. If anyone can offer me any tips, it would be really appreciated.
Robert, go and see your solicitor. If you don’t have one, it’s time you did.
It is a lovely gesture on mum’s part, but should she need residential care in the future, it could be classed as “deprivation of assets”.
If your mum is the sole beneficiary of the will ask her to do a deed of variation to the will leaving the property directly to you. You may need a solicitor to do this. This negates the need to live for 7 years to remove it from her estate for inheritance tax purposes. If the estate is over the 325k nil rate limit them inheritance tax will need to be paid regardless of who inherits the property. She of course can just gift it to you if she wishes. Should you sell the property them income tax won’t come into it but capital gains tax could if the value of the property has increased since you owned it however you have an annual allowance of £11500 ( not sure if this has increased) I hope this helps.
Ah yes, we did this when my eldest brother died. It has to be done within two years of the death. The sole beneficiaries (apart from a couple of small gifts) were my other brother (80) and I (70). Instead of the brother then owning the whole house, half of it went to me, so when the second brother died the inheritance tax was more tolerable. If the beneficiaries agree, the will can be varied. A wonderful thing! We used a solicitor to vary the will, so you need to see a solicitor about this. It must make financial sense.