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Care Fees Schemes and Tax


I wrote blog recently about clients transferring their property to their children, and the problems it can cause. Another surprising issue that we see more and more of late if that the children are being hit with tax bills when they eventually come to sell their parents’ property. This might be because the parents want to move home.  It might be because the parents have died, or are in residential care. The children have usually not lived in the property at all since it was transferred to them from their parents.  What this means is that they have to pay Capital Gains Tax (‘CGT’). CGT is payable when you sell a property that is not your Principal Private Residence – i.e. it is not where you live.  It does not matter if you don’t own another property, the tax is still payable. The tax is calculated (on a very basic level) by taking the current value of the property, deducting the value of the property when it was transferred, and then taxing 18% or 28% of that difference. I came across an example recently where the parents had transferred their property to their children in 1991. Taking the average house price at that time in the East Midlands, the house would have been worth around £55,000. It is now selling at £150,000. The difference is £95,000.  Taking the lower tax rate of 18%, and a very simplistic view, that’s a tax bill of potentially £17,100. That comes as a huge shock to people. If you would like to know more about care fees, or are worried because you have transferred your property to your children, please contact a member of our Private Client team  on 01623 451111, or email rhoward@fidler.co.uk.

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