Mother Selling Me Her UK house

[2009]

On 8/24/2021 at 9:14 AM, MarkT63 said:

Hi Neeranam.

 

If she sells you the house and continues to live in it she should pay you the market rent for the property which you should declare as income in the UK and pay tax on.

 

 

One to keep in mind.

 

 

But if you are in the UK less than 3 months a year, there's no tax.

 

Why would she pay him rent after? She could keep the money and when she ends up in a home, it'll be a 5 star home.

[bje2000]

Neeranam

I used to work in the Australian equivalent to the UK Work and Pensions, and while the rules wouldn't be the same, they may be similar. It would be best to contact W&P and just ask the them the general questions on an anonymous basis. 
It is likely that if she goes into a nursing home, then her home may be assessed. If she sells, it is possible that the proceeds will be assessed to help pay for her care. There are likely limits on gifting before things (pension/Nursing home etc) start being affected.
If your sister is on an Australian pension, then any money she receives from the sale may affect her pension (maybe her UK as well) - she will need to look into that.

[vinny41]

Op and his mum should seek professional advice 

 

As it stands today his mum's inheritance tax allowance is £325,000 + £175,000 as she owns property and she intends to leave property to her Direct descendants leave the property to anyone else no £175,000 allowance 

However if she gifts that property or puts the property into a trust so she no longer owns it then she loses the £175,000 Residence nil-rate band tax allowance and her inheritance tax allowance would reverted back to £325,000

https://www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-property-changes-asy688s1j5zj

[CrunchWrapSupreme]

On 8/24/2021 at 11:26 AM, Denim said:

one day when my mum can no longer take care of herself I will have to go back to the UK to care for her and my wife will have to remain here caring for her mum. I couldn't stand the thought of my mother going into a home after all she has done for me

That's my plan as well. My mom's getting up there in years. Right now she's got other fam with her, but in time they'll need more help. After a few more years of this Thailand adventure, my Thai wife and I will be going back to stay with her in the States.

[Oxx]

1 hour ago, 2009 said:

But if you are in the UK less than 3 months a year, there's no tax.

This is totally, 100% wrong.  Generally speaking, the property owner would need to register with HMRC as a Non-resident Landlord, and the income would be taxable.

[2009]

7 minutes ago, Oxx said:

This is totally, 100% wrong.  Generally speaking, the property owner would need to register with HMRC as a Non-resident Landlord, and the income would be taxable.

Interesting, has something changed?

 

I worked abroad as an engineer for decades and the way it worked out with our company/agency was: if we only came home for less than 3 months a year, our income was tax-free. It was a UK company, btw, the work was just done abroad.

Edited August 26, 2021 by 2009

[Will B Good]

2 minutes ago, Oxx said:

This is totally, 100% wrong.  Generally speaking, the property owner would need to register with HMRC as a Non-resident Landlord, and the income would be taxable.

Yes, I would agree. Being non-resident just delays paying the tax, you still have to declare the untaxed income each year rather than having it taxed at source (I think).

 

If you are a UK citizen you still pay UK tax on income earned in the UK regardless of where you live.

[2009]

4 minutes ago, Will B Good said:

Yes, I would agree. Being non-resident just delays paying the tax, you still have to declare the untaxed income each year rather than having it taxed at source (I think).

 

If you are a UK citizen you still pay UK tax on income earned in the UK regardless of where you live.

Interesting, what if you are a British citizen (non-resident) and holding stock (not in UK)?

[Will B Good]

Just now, 2009 said:

Interesting, what if you are a British citizen (non-resident) and holding stock (not in UK)?

Mmmm.....I think then you are into the realms of where you are 'tax' resident.

 

For example Lewis Hamilton is tax resident in Monaco so pays tax on all his global earning to Monaco, except anything he earns in the UK, which he still has to pay to HMRC.

 

I am sure someone with far superior knowledge will confirm or correct the above.

[2009]

14 minutes ago, Will B Good said:

Mmmm.....I think then you are into the realms of where you are 'tax' resident.

 

For example Lewis Hamilton is tax resident in Monaco so pays tax on all his global earning to Monaco, except anything he earns in the UK, which he still has to pay to HMRC.

 

I am sure someone with far superior knowledge will confirm or correct the above.

Yeah, I believe if you stay in Thailand 6 months a year you have to pay tax, but not sure about overseas investments.

[Will B Good]

3 minutes ago, 2009 said:

Yeah, I believe if you stay in Thailand 6 months a year you have to pay tax, but not sure about overseas investments.

No, not sure either.....someone on here will know.

[treetops]

The OPs plan will result in his mum getting a basic (low) level of care from the local authority paid from their coffers.  Realising the value of her house will allow her a much more comfortable time in her final years.  I know which one I want for my mum and it won't involve me filling my pockets.

[2009]

19 minutes ago, treetops said:

The OPs plan will result in his mum getting a basic (low) level of care from the local authority paid from their coffers.  Realising the value of her house will allow her a much more comfortable time in her final years.  I know which one I want for my mum and it won't involve me filling my pockets.

This is true.

 

Advice to the OP.

 

Sell the house. Let your mum keep enough to pay for a few years in the best home, then after that the government picks up the bill and she will stay in the same home (they don't like to move them).

 

The best homes cost a lot though, like a grand a week. However, when you go there, you see why. Really nice, almost like a 5 star hotel run by nurses.

 

This is what has been done in my family/friend circle. It works. You really just need to pay the first few years.

Edited August 26, 2021 by 2009

[sometimewoodworker]

3 hours ago, 2009 said:

But if you are in the UK less than 3 months a year, there's no tax.

Only if your U.K. income is under the personal allowance.

[malthebluff]

Sells to you very cheap the lawyer will cost same as buying any house doing survey and that and then you rent it to her. you are allowed rent upto  £7500 a year without the need for tax man to know or pay any tax No money changes hands of course cant really charge your mum rent can you  but put it all on paper and have it witnessed by lawyer to make it all legal  This is  what i did about 12 years ago and I dont think law has changed. If she gifts you the house she has to stay around 7 years to stop you paying inheritance tax 

[sometimewoodworker]

1 hour ago, 2009 said:

Interesting, what if you are a British citizen (non-resident) and holding stock (not in UK)?

It depends on your tax residence status and where and how the investments are held. 
So it could be U.K. tax free. Non-resident status takes a long (years) time to achieve just not living in the U.K. doesn’t make you non-resident. It could also be free of Thai tax if correctly managed.

[sometimewoodworker]

2 minutes ago, malthebluff said:

Sells to you very cheap the lawyer will cost same as buying any house doing survey and that and then you rent it to her. you are allowed rent upto  £7500 a year without the need for tax man to know or pay any tax No money changes hands of course cant really charge your mum rent can you  but put it all on paper and have it witnessed by lawyer to make it all legal  This is  what i did about 12 years ago and I dont think law has changed. If she gifts you the house she has to stay around 7 years to stop you paying inheritance tax 

Incorrect information. The personal allowance is about £12,000 and yes you do have to declare it for tax. And you will have to pay CGT when you sell or die

Edited August 26, 2021 by sometimewoodworker

[Orinoco]

1 hour ago, 2009 said:

This is true.

 

Advice to the OP.

 

Sell the house. Let your mum keep enough to pay for a few years in the best home, then after that the government picks up the bill and she will stay in the same home (they don't like to move them).

 

The best homes cost a lot though, like a grand a week. However, when you go there, you see why. Really nice, almost like a 5 star hotel run by nurses.

 

This is what has been done in my family/friend circle. It works. You really just need to pay the first few years.

We paid 1300 a week.

Sold the family home to do it.

was good care, till covid 19 get her in the care home.

 

 

 

 

 

 

Edited August 26, 2021 by Orinoco

[vinny41]

2 minutes ago, malthebluff said:

Sells to you very cheap the lawyer will cost same as buying any house doing survey and that and then you rent it to her. you are allowed rent upto  £7500 a year without the need for tax man to know or pay any tax No money changes hands of course cant really charge your mum rent can you  but put it all on paper and have it witnessed by lawyer to make it all legal  This is  what i did about 12 years ago and I dont think law has changed. If she gifts you the house she has to stay around 7 years to stop you paying inheritance tax 

You can remain living in the home after you have gifted it, but you cannot do so rent-free if you want the property to be discounted from any IHT calculation after the seven-year qualifying period has ended.

HM Revenue & Customs rules state that the person or people who have made the gift must pay the beneficiary rent at the “going rate” (that is, the rate that applies to similar properties in the local area) in order for the home to fall outside the IHT net.

https://www.saga.co.uk/magazine/money/personal-finance/giving/tax-and-gifting-property

[malthebluff]

2 hours ago, sometimewoodworker said:

Incorrect information. The personal allowance is about £12,000 and yes you do have to declare it for tax. And you will have to pay CGT when you sell or die

Not personnel allowance that's for tax code. Rent a room tax not the same you allowed to rent up to 7500 on top of your personal allowance 

[malthebluff]

2 hours ago, vinny41 said:

You can remain living in the home after you have gifted it, but you cannot do so rent-free if you want the property to be discounted from any IHT calculation after the seven-year qualifying period has ended.

HM Revenue & Customs rules state that the person or people who have made the gift must pay the beneficiary rent at the “going rate” (that is, the rate that applies to similar properties in the local area) in order for the home to fall outside the IHT net.

https://www.saga.co.uk/magazine/money/personal-finance/giving/tax-and-gifting-property

That's why I said buy it like you would another house and not gift it. And then rent it back 

[malthebluff]

2 hours ago, sometimewoodworker said:

Incorrect information. The personal allowance is about £12,000 and yes you do have to declare it for tax. And you will have to pay CGT when you sell or die

 

[malthebluff]

2 hours ago, sometimewoodworker said:

Incorrect information. The personal allowance is about £12,000 and yes you do have to declare it for tax. And you will have to pay CGT when you sell or die

I think you will find I am right you getting confused with personal allowance for tax not the same thing as for cgt it's around £12500 of any profits but that's nothing if getting 7500 a year tax free

[vinny41]

40 minutes ago, malthebluff said:

That's why I said buy it like you would another house and not gift it. And then rent it back 

For the op to buy the property from his mum to reduce her inheritance tax liability would be crazy

At the moment as she is a property owner and plans to leave the property to her  Direct descendants

her inheritance tax free allowance is £500,000 , if she sells the property and rents her inheritance tax free allowance is reduced to £325,000 so anything over the £325,000 figure would be subject to 40% tax

[malthebluff]

If he buys it in the same way  as buying any other house and classes said house as his main home so the house was never inheritance it was bought and  as the house will belong to him and used as his main home ( on paper) he can rent it back to his mum  for up to 7500 a year tax free so no inheritance tax to pay unless he dies and leaves it to somebody else

[sometimewoodworker]

9 hours ago, malthebluff said:

Not personnel allowance that's for tax code. Rent a room tax not the same you allowed to rent up to 7500 on top of your personal allowance 

HMRC does not agree, my tax accountant does not agree. 

As you are so sure (and neither HMRC nor my accountants agree), it would helpful to your statement to give a link to the HMRC website with that specific allowance.

 

Please remember that the OP is not living in the property, the OP is living in Thailand. The advice on allowance is directly related to the OP, it is not general advice on U.K. taxes 

 

Any advice related to someone living in a property in the U.K. and renting part of their home is irrelevant to the OP since they don’t live there.

 

Quote HMRC

Quote

Eligibility

You can opt in to the scheme at any time if:

• you’re a resident landlord, whether or not you own your home
• you run a bed and breakfast or a guest house

 

Edited August 27, 2021 by sometimewoodworker

[sometimewoodworker]

7 hours ago, malthebluff said:

If he buys it in the same way  as buying any other house and classes said house as his main home so the house was never inheritance it was bought and  as the house will belong to him and used as his main home ( on paper) he can rent it back to his mum  for up to 7500 a year tax free so no inheritance tax to pay unless he dies and leaves it to somebody else

It is far more complex than you suggest, you are also wrong in your reading of HMRC tax law.

 

You are entitled to the personal allowance (£12,500 in the 2020/2021 tax year) so if your total income in the U.K. is under this amount you are free of tax.
 

As the OP will not be living in the property and will not be renting it as bed and breakfast or a guest house the extra rent a room allowance will not apply 

 

look at the HMRC guidelines. The OP is specifically excluded, if you don’t want to expand the quote the relevant exclusion is extracted under 

NB the formatting is HMRC’s not mine, I would have reduced the sizes if it were obvious how to do so

 

Quote

2. When you cannot use the Rent-a-Room Scheme

You cannot use the scheme if the accommodation is:

• not part of your main home when you let it
• not furnished
• used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
• in your UK home and is let while you live abroad

 

2. When you cannot use the Rent-a-Room Scheme

^{You cannot use the scheme if the accommodation is: in your UK home and is let while you live abroad}

Edited August 27, 2021 by sometimewoodworker

[sometimewoodworker]

Note;

not paying tax because you do not inform HMRC of your circumstances doesn’t make it legal or safe.
 

HMRC has extraordinary wide powers to audit, reclaim back tax and impose fines for those who do not inform them of a tax liability. (This can also apply even if there is no tax to pay due to allowances) isn’t HMRC wonderful? 55555

 

You are required to tell HMRC of any taxable income, they are not required to ask. HMRC may tell you that you do not need to fill in a tax return, unless, and until, they have told you that you don’t need to submit a return, the safest course is to submit a return.

 

Lying to HMRC (or not telling the complete truth) about your circumstances may be successful.
The penalties for being caught out are not usually small

Edited August 27, 2021 by sometimewoodworker

[sometimewoodworker]

14 hours ago, 2009 said:

Interesting, has something changed?

 

I worked abroad as an engineer for decades and the way it worked out with our company/agency was: if we only came home for less than 3 months a year, our income was tax-free. It was a UK company, btw, the work was just done abroad.

Tax laws certainly have changed significantly.
 

While I don’t know the setup for your situation, today you could find that as an overseas employee of a U.K. company you are liable to pay U.K. tax

[malthebluff]

4 hours ago, sometimewoodworker said:

Tax laws certainly have changed significantly.
 

While I don’t know the setup for your situation, today you could find that as an overseas employee of a U.K. company you are liable to pay U.K. tax

Of course you dont tell the tax man  you living in thailand no retiree would as their pension get frozen. You use this as your main home ( address) the rent a room is tax free up to 7500 so this is added to your tax allowance it's just a loop hole in the law not fully legal but it is away from the init paying nheritance tax the op asked about 

 

On 8/8/2021 at 9:52 PM, steven100 said:

it's a cobra ....     thailand only has Cobra's ... hic