Are there any tax implications if I gift land to my son?
I own a small field worth around £25,000. Am I able to give the land to my son? Would there be any tax implications?
"A gift of land or property is liable for capital gains tax just the same as if you had sold it.The base cost of the land will be deducted from the market value to assess the capital gain.
Provided the field was used in your business or was used for agricultural purposes, then you can make a joint claim along with your son for the gain to be deferred until he sells the property. Your son will need to include its cost when he works out the gain on the land when he sells it later.
Only if the amount of the gain is more than £11,000 must you report the gain to HMRC, by completing a self- assessment tax return by 31 January following the end of the tax year in which the transfer took place. In any event, you will need a professional valuation to be able to substantiate your claim as to its value as you may be challenged by HMRC.
The sale of the land is also subject to stamp duty land tax. Assuming the land is freehold, no stamp duty land tax arises as it is below the nil rate currently at £150,000. In any event, you will need to register the transfer at the Land Registry.
Gifts from one person to another are considered potentially exempt transfers, which means you don’t pay inheritance tax (IHT) when you make the gift, but your beneficiaries might have to when you die. If you survive more than seven years after the gift, then no IHT will be payable.
If you die before seven years have elapsed, then your estate will be subject to inheritance tax on a sliding scale at up to a maximum of 40% before any reliefs.
Agricultural property can benefit from relief from IHT provided it is land or pasture that is used to grow crops or to rear animals intensively.
The property must have been owned and occupied for agricultural purposes for at least two years by you for relief at up to 100% to apply."
David-Wesley-Yates is a chartered adviser at Red & Black Accountancy.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
Permanent and absolute ownership and tenure of a property (residential or commercial) and/or land with freedom to dispose of it at will but with no time limit as to how long the property/land can be held (in perpetuity). Freehold is the opposite of leasehold.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.