When it comes to helping our loved ones, especially our children, we often want to provide them with the best opportunities and support possible. In the case of Walter, who bought a flat for his daughter 12 years ago, he is now considering gifting the property to her once he has repaid the mortgage. However, there are important financial considerations to take into account before making this decision.

Natasha Percy-Baxter, director of PercyBaxter Wealth Management, advises Walter on the potential tax implications of gifting the flat to his daughter. Capital gains tax (CGT) is a concern when gifting a property, as the profit from the transaction may be subject to CGT. In this case, the profit from the increase in value of the flat from £200,000 to £400,000 will be considered for CGT purposes. However, there are ways to minimize the CGT liability, such as using the annual CGT allowance, deducting transaction costs, and offsetting losses from other investments.

It is important to note that the gift must be made at market value to avoid fines. Reporting the disposal of the property to HMRC within 60 days of gifting is also necessary. In addition to CGT, stamp duty and inheritance tax (IHT) are other taxes to consider. Stamp duty may apply depending on the circumstances of the gift, particularly if there is an outstanding mortgage on the property. As for IHT, gifting assets can help reduce the overall value of the estate and potentially lower future IHT bills, but the property will only be free of IHT if Walter lives for seven years after making the gift.

With the tax-free thresholds for CGT, stamp duty, and IHT in mind, Walter can make an informed decision about gifting the flat to his daughter. It is essential to plan ahead and seek professional advice to navigate the complexities of tax implications when transferring property ownership. By understanding the financial considerations involved, Walter can ensure that his daughter receives the gift of the flat without any unexpected tax consequences.