If someone wants to gift a house to his children, he needs to consider the following tax consequences regarding the gifted house.
Capital Gain Tax (CGT):
There will be a Capital Gains Tax (CGT) and the proceeds will be deemed to be the market value of the property at the date of the gift. The gain is calculated in the normal way. It can qualify for any reliefs, such as Principle Private Residence Relief, as well as the Annual Exempt Amount.
Stamp Duty Land Tax (SDLT):
SDLT is not charged on a gift of land or property if there is no chargeable consideration. There is no market value rule as there is for CGT unless the gift is to a connected company. However, the assumption of a debt is chargeable consideration. So, a gift may give rise to a SDLT charge if the transferee takes over the mortgage on the property. The amount of the mortgage they take on is the amount of the chargeable consideration.
The gift will also be a Potentially Exempt Transfer for Inheritance Tax. Therefore, if the donor dies within 7 years of making the gift then Inheritance Tax may be payable on the value of that gift.
Please contact us to know more about tax consequences on the gifted house. Our tax experts can assist you.