My elderly aunt wants to give me a seaside chalet, which she inherited when her mother died in 1985. If I accept this gift will I have to pay tax on it?
You won’t have to pay any tax when you take ownership of the property. However, your aunt should declare the gift on her tax return. If the increase in value in the property between the 1985 value when she inherited it and its value when the property passes to you, is greater than her annual capital gains exemption (currently £10,100), she will have to pay capital gains tax at 18% on any excess above the unused exemption amount. The value of the chalet at the date of the gift could also be subject to inheritance tax at 40% if your aunt dies within seven years of making the gift. However, inheritance tax will only apply if the value of your aunt’s total estate on death, plus all the capital gifts she has made in the previous seven years, exceeds the IHT exempt band. This is currently £325,000, and will rise to £350,000 on 6 April 2010. This exempt band could be doubled if your aunt is a widow when she dies.
