If I (a non-UK resident) transfer to my daughter (a UK resident who is living in the flat) 50% equity of the flat I purchased in 2021 for around £270,000 (which is not under a mortgage) for no consideration, will she or I be liable for capital gains tax (CGT)? If so, would it be better from a tax perspective to bequeath the flat to her under my will, in which case there will be no inheritance tax (IHT) payable, given the threshold of £500,000 for gifts to children?
Arthur Weller replies:
If the flat is worth more today than it was in 2021, you will be subject to CGT on half the value of the house (e.g., if today the flat is worth £350,000, you will be deemed to be making a capital gain of £40,000. It is true that there is a nil-rate band for IHT purposes of £325,000 and a residence nil-rate band (RNRB) of £175,000 if the person's main residence is left to their children, so totalling £500,000. However, you should clarify with a tax adviser whether you are eligible for the RNRB.