Q I would be grateful for advice regarding my elderly aunt’s estate: I am her attorney and sole beneficiary in her will. She moved in with us several months ago and has expressed a wish to give her house to me now. I was wondering about the tax implications of this transfer of ownership, both for her and myself, and whether this would be different if the house is kept or sold. Also, is it possible to transfer ownership without incurring solicitor costs? DW

A To answer your last question first: yes, it is possible to transfer ownership of a property without paying a solicitor, by using the forms provided by the Land Registry. But there would still be a cost involved as you would have to pay Land Registry fees of between £50 and £920 depending on the value of the house.

As for tax implications, there would be no stamp duty land tax to pay as gifts of property do not attract this tax. However, there may be a potential inheritance tax bill if your aunt were to die within seven years of making the gift. This would also be the case if your aunt sold the house and gave you cash instead of giving you the physical property. But giving you cash could save you a tax bill, because if your aunt gave you the house and you subsequently sold it, you might have to pay capital gains tax if you sold it for more than it was worth when you were given it.

Q My parents are in their 70s and own a second property, which they let out. They want to sell but fear the capital gains tax (CGT) which would be levied. They bought the house for £53,000 in 1987 and it is on the market for £210,000. They each own 50%.

On selling they have been advised of a CGT bill of between £15,000-£25,000 each after both their annual CGT limits of £10,600 have been applied. They understand that the CGT would be levied at 28% as the capital gained, after tax, will take them above the higher tax limit (ie the capital gain is effectively counted as income for that tax year).

However, it is unclear if this higher tax limit is for a single person or a couple. Would just over £80,000 of the gain be taxed at 18% and the excess above this and including all other annual income charged at 28%? If the house is put in four names – my parents, my sister and I – would this mean the CGT bill is reduced because there would be four CGT allowances?

I understand there are also implications for inheritance tax and the seven year rule. I also believe that if this transfer were enacted but the house did not sell then the revenue from the let would be split four ways, with each party paying income tax. I am not clear, though, on whether the transfer of ownership would involve stamp duty. Please help! JS

A Assuming your parents sell the property for £210,000, the most each will have to pay in CGT is just over £19,000. This is worked out by taking the sale price of £210,000, subtracting the purchase price of £53,000 and dividing by two to give a gain of £78,500 that each of your parents might make. From the £78,500 you then subtract the tax-free CGT allowance of £10,600 (in the 2011-12 tax year) to produce a taxable gain of £67,900. Assuming the higher CGT rate of 28% the tax bill would be £19,012 each.

But that assumes all of the gain is taxed at 28%, which it not might be. The capital gain is not taxed as income, but you are right in thinking that any capital gain is added to income to determine what rate of CGT is payable. If taxable income (gross income minus personal tax allowance) plus capital gain comes to less than £35,000, all of the gain is taxed at 18%. If taxable income plus gain comes to more than £35,000 (as in your parents’ case), the portion of the gain that takes you over the £35,000 is taxed at 28% while the portion of the gain up to £35,000 is taxed at 18%. As your parents are taxed separately their actual tax bills will depend on their income, so could be very different.

Transferring half the property to you and your sister would not mean you benefit from four times the annual tax-free allowance of £10,600. Giving away half the property counts as a disposal for CGT purposes and it’s the person (or people) doing the disposing who are liable for the tax and also entitled to claim the tax-free allowance.

But the tax-free allowance is not given per gain, it is given against total gains in a tax year. So if, in the same tax year, your parents gave away half the property and then sold the other half – each making a gain of £39,250 at each disposal – the taxable gain after the annual allowance would be the same as if they had simply sold the property.

If your parents did give you and your sister half the property you are right that inheritance tax could be payable if your parents died within seven years of the gift being made, but not if they survive for seven years. You are also right in thinking that if the house continued to be let you would have to divide the rental income between you and pay tax on it.

Any transfer of property is potentially liable to stamp duty land tax if it is over the £125,000 threshold, so not in your case, although you would have to pay a fee to the Land Registry on transfer of ownership.