CGT on transfer of part equity of second home to child

I currently own a second property jointly with my wife. We want to transfer 25% of the equity to my son with my wife and I retaining the other 75%. The property was bought about 10 years ago for 100k and we currently estimate the value to be about 200k. I assume that CGT is payable but would like to confirm that it is only due on 25% of the capital gain (ie 25k) and that my wife and I would share the gain equally - therefore both having an ellowance exemption of 6k giving a taxable gain of 13k which we would share equally and each pay at our marginal rate.

Hi,

As the disposal will not be at arms length, because you are transferring a share of the asset to your son, you will need to obtain the market value for the property at the time of the transfer of 25% to your son. As the property is jointly owned, both you and your wife will need to perform separate calculations.

To do this, split the acquisition costs and the market value 50/50. Work out 25% of the acquisition cost and the market value, for example, £100000 split 50/50 is £50000 at 25% = £12500. £200000 split 50/50 is £100000 at 25% = £25000. Buying and selling costs should also be apportioned.

There is a calculator to help you work out the amount of gain and the tax payable.

Tax when you sell your home

Thank you.
 

I saw that there was a calculator - but I thought it said it couldn't be used if only a share of the property was being disposed of. Please clarify if we're talking abou the same calculator. Whether I calculate manually or using a calculator, how do we inform HMRC of the results and how long do I have to do it? On my self-assessment tax return for 22/23 one of the options seems to be to declare CGT and yet elswhere I've seen advice that indicates I need to report/pay CGT within a couple of months of the disposal. Please advise.

Hi,

You can still use the calculator. If it is UK residential property that has been transfered. This needs to be reported and paid within 60 days.

Please see futher guidance at:

Report and pay your Capital Gains Tax

Thank you.

Hi, I read the above question and reply and thank you for the work example from admin19. My wife and I would also like to transfer a portion of the equity of our family home to my eldest son who is currently living there already. The family home was purchased back in 1991 but due to work reason, we have been abroad since 2001 and have been non-UK tax residence for 15+ years. My understanding for the valuation of the property is reset to 2015 in case of non-UK tax residence disposal. Is this the scenerio I can use for the calculation of the market value? What assumption I should use for the acquisition cost back in 1991? Inflation linked to 2015? Thank you for your clarification in advance.

Hi
As you take the value at 2015 the price paid in 1991 is not relevant.

Thank you for your confirmation to use 2015 value. Would an estate agent (who managed the property) valuation be acceptable to HMRC or a chartered surveyor "Red Book Valuation" be required? Regarding my earlier question on the acquisition cost, I am referring to the legal and survey cost incurred in 1991 when I bought the property. Should these be inflation linked upto 2015? Thank you.

Hi ccw,
An estate agent valuation would be acceptable, you cannot inflate the costs of buying the property as these will still be the same.
Thank you.

If transferring a portion of the equity of a residential property to a child, can i still use the online capital gains tax return? The options given for the disposal are- sold gifted other if i choose gifted, it never asks me what percentage i gifted. Do I just put figures in equating to the percentage gifted? Thanks

I have a similar question regarding the completion of form TP1 and how to indicate proportions.

Apologies for jumping on your thread. I have a query from the above. We currently have our house up for sale, but are now going to buy a second property to reside in and and going to rent out our 1st that is up for sale. This has made £90k in 7 years without any major home improvements to evidence. Would this estate agent valuation be sufficient to evidence the current value and to avoid paying CGT on the 90k increase in value prior to rental if we were to sell it at a later date? Thanks

Can I add to Philp's query above - the self assessment Capital Gains tax account only asks how much of a property is owned, and the sahare of market value when giving it away. What does one enter if you own 100% of a property, but only gift 50% away? eg Do you fill in the form as if you only own 50% of the property, as that is what is being given away, if gifting half rental to an offspring? Thanks

I have a question re CGT my husband and his ex wife and son own a flat in 1/3 shares. Ex wife wants to transfer her 1/3 to son. Husbands share remains the same while sons share increases to 2/3. Husband is needing to sign the transfer of the 1/3 share from ex wife to son. She is liable for CGT on the disposal of the asset. Husband has no gain so no CGT payable. Is this correct?

Hi Ari,
Yes  show it as the 50%. if it is just the rental income that you are gifting and not the actual property to them that form is not applicable and you would send in a declaration of trust.
Thank you.

H i Paula,
You need to pay Capital Gains Tax when you sell (or 'dispose' of) an asset if your total taxable gains are above your annual Capital Gains Tax allowance. As your husband's ex wife is disposing of her asset, she might be liable to CGT. As your husband and his son are retaining their share they will not be at liable at this time, but maybe in the furture if they choose to sell or dispose of the asset.
You can find out more information here: Capital Gains Tax.
Thank you.

I am considering selling my second home (100% share) to my son who lives in it ( rent free). This would be at a discounted rate. How is CGT calculated? is it different if you are basic rate tax payer?

Hi catmo,
You need to pay Capital Gains Tax when you sell (or 'dispose of) an asset if your total taxable gains are above your annual Capital Gains Tax allowance, for the 2024 to 2025 tax year this is £3000 for individuals. 
you can find details here: 
Tax when you sell your home.
Thank you.


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