I'd like to give my mum my old flat but will I get a tax bill if she sells up?

17 May 2016


I intend to move in with my partner and give my flat to my mum in order to provide her with a rental income until she dies when it will be bequeathed to her grandson. The plan is for my mother to stay in her own home for as long as she can.

When that is no longer an option, she will sell her house and we will pool our funds to buy a bigger house so she can move in with us. My question regards capital gains tax (CGT). Will I be liable if I give her my flat? Also, will there be any capital gains or inheritance tax (IHT) issues with our plan to pool our housing money to buy a big house for us all.

Finally, if my mother decided to sell the flat rather than leave it to her grandson would there be a tax bill?



Assuming you lived in your flat as your main residence and weren’t absent from the flat for large periods and didn’t use any part of your flat exclusively for business purposes, then you are likely to qualify for principal private residence relief and will avoid capital gains tax on the transfer of your property to your mother.

The same is likely to apply to your mother when she gives up her home to come and live with you.

Should she sell the flat, she will be subject to CGT as the flat is not her main home but rather an investment property. The gain will be calculated by taking the proceeds of sale less any expenses incurred in selling the property, such as estate agents and solicitors fees, and less the price at which the property was transferred from you to her.

Should she pass the flat to her grandson in her will, then no CGT will arise. However, it will form part of her estate and be subject to IHT at 40% if her whole estate is worth more than £325,000.


There may be scope to avoid this charge by you passing on the flat directly to her grandson and finding alternative sources of income for your mother or by transferring the property into trust. Gifts from one person to another count as potentially exempt transfers.

That is you don’t pay IHT when you make or receive the gift, but your death estate might have to when you die. If you survive more than seven years after the gift, no IHT is payable. If you die before seven years have elapsed, then the person who received the gift will be subject to IHT on a sliding scale at up to a maximum of 40% before any reliefs.The gift of the flat from you to your mum will be a potentially exempt transfer and may be caught by IHT if you die within seven years.

There is good scope to minimise your IHT liability here either by trusts or otherwise, and I would strongly encourage you to take expert tax advice.