Capital gains tax from house sale

janeboo65

New member
Jan 30, 2024
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Hi guys, I'm looking for advice for a friend and found this old thread, don't know if anyone can add please!

Her mum has been in long term self funded residential care for about a year and they are selling her house.

The issue is that the house was gifted to my friend and her sister about 4 years ago, and they are concerned they may be liable for CGT. My friend does not own a property but her sister does.

Can anyone offer advice please?!
 

Pebblepebble

Registered User
May 29, 2022
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Does this help?

Private Residence Relief​

You do not pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:
  • you have one home and you’ve lived in it as your main home for all the time you’ve owned it
  • you have not let part of it out - this does not include having a lodger
  • you have not used a part of your home exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use)
  • the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
  • you did not buy it just to make a gain
If all these apply you will automatically get a tax relief called Private Residence Relief and will have no tax to pay. If any of them apply, you may have some tax to pay.
 

janeboo65

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Jan 30, 2024
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Thank you pebblepebble!
The house was my friend's mum's main residence and fulfilled all the criteria above, however 4 years ago she gifted the house jointly to her 2 daughters. Neither of them have lived in it, it has not been rented out, their mum lived there until about a year ago when she moved to residential care. I think they thought this would make it better but it seems to complicate things.
 

janeboo65

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Jan 30, 2024
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They are not expecting any profit from the sale, obviously all the proceeds will go to care home fees, but will they pay tax on it, and if so will it come from the sale proceeds or their own pockets?
 

nitram

Registered User
Apr 6, 2011
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Bury
obviously all the proceeds will go to care home fees
Why obviously, they will not be the resident, they will be a third party.

This was my point that in any financial assessment the LA might consider that the gift of the property was a deliberate action to reduce mum's assets.
 

nitram

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Apr 6, 2011
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will they pay tax on it, and if so will it come from the sale proceeds or their own pockets?
Depends on increase in value over the 4 years, assuming they have equal shares they each have £3k exemption on half the increase less fees.

The value of the house is in their pockets - it was gifted to them - so any tax comes out or their pockets.
 

nitram

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Apr 6, 2011
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Bury
Was the house gifted with lifetime right of residence?
If so was there a clause about permanent residence in care home?
There's also inheritance tax to consider, the gift was a potentially exempt transfer.
 
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janeboo65

New member
Jan 30, 2024
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Thanks nitram, I'm afraid I don't know all the answers! I'll have to go back to my friend for more info.