Gifted Property from Parents – What Taxes Apply in the UK?
My parents gifted me their house What taxes do we need to pay? MY PARENTS ARE GIFTING ME THEIR HOME. JUST WANT TO KNOW WHAT TAXES THEY HAVE TO PAY AND WHAT WILL BE MY TAX RESPONSIBILITIES. One of our clients in his 40s approached us who is about to become the owner of his parents’ house in which he was living with them since his childhood. He was a bit confused as he had been hearing about lots of taxes involved while dealing with the properties. In the following blog we will be talking about the taxes which are generally involved with the properties and gifts and whether a person in the situation same as above will have to pay those taxes. CAPITAL GAINS TAX Capital Gains tax is a tax which is paid on the disposals or transfers of the assets. Capital Gains Tax is not paid on the disposal of the property which is your main home. For the property to qualify as your main home you need to be living in that house for as long as you have owned it, You must have never rented it and It’s not used as your office (It can get tricky if you are self-employed and your registered office address is same as your main residence). This is called private residence relief. Since in this situation the individual is living with his parents in the same house since childhood and the above criteria is met no CGT liability will arise as a result of the transfer of the property. However, it would be a good idea get the valuation of the property done at the time it is gifted to you. STAMP DUTY LAND TAX Stamp duty land tax is not paid on the property that is gifted to you. However, there is an exception. If the property that is gifted to you has an outstanding mortgage, SDLT will have to be paid if the value of the mortgage is above the value of SDLT threshold. SDLT will also need to be paid if the property was gifted by the parents to the siblings and one of the siblings wants to buy the share from the other siblings. In such cases HMRC needs to be informed as you might have to pay SDLT in this situation. INHERITANCE TAX No inheritable tax needs to be paid if the parents gifted the property during their lifetime and continued to live for 7 years. If they die within 7 years of making the transfer inheritance tax will need to be paid according to the 7 year rule. PAYING RENT In this situation when the person to whom the property is transferred is also living in the property and after gifting the property the parents continue to live with you they don’t have to pay any rent to you. However, in situations when after giving the gift the parents continue to live in the same house and you live somewhere else the parents will have to rent and their share of bills. So in conclusion in the above situation not much taxes are involved and it’s a pretty much straightforward transfer. However, there are different taxes which you need to pay if you plan to move out of the property, sell it or rent it. If you need assistance with any sort of advice on taxes you can consult Taxaccolega and our expert team will be happy to help you. You can visit us in our Croydon and South hall branches or call us at 020 8127 0728. CTA Box See How Much You Can Save CALL NOW Take the stress out of UK taxes and accounting today — speak with a top-rated Taxaccolega chartered accountant for personalised advice tailored to your business or personal needs. Book a free Consultancy Related Posts ID Verification × ID Verification Form For Companies House From 18 November 2025, UK law will require all company Directors and Persons with Significant Control (PSCs) to verify their identity with Companies House. Companies House will issue a personal code to PSCs. Taxaccolega (ACSP) can help collect data and assist. Please answer the questions and upload documents. Personal Details Fornames * Last Name * Date of Birth *
What are dividends and what taxes do I pay on them?
What are dividends and What taxes do I pay on them? If you are running a limited company or about to start a business of your own you should be familiar with dividends. Dividend is the sum of money which is paid to the director/shareholder of the company. Dividend is distributed to the director or the directors of the company after the company has deducted all its expenses from the income and paid all the liabilities such as corporation tax. It should be noted that the dividend cannot be treated as an expense. Dividend can be distributed to the shareholders at any time during the year. It can be paid monthly, quarterly or yearly or at any frequency as decided by the directors of the company. When you are running a limited company you can also pay yourself salary. Salary has different tax implications as compared to the dividends. Therefore we always recommend our clients to keep a record of dividend vouchers and minutes of the meeting in which the dividends were declared in order to make sure that dividends are not confused with salary by HMRC as different tax liabilities arise in each case. TAX IMPLICATIONS OF DIVIDENDS DIVIDEND ALLOWANCE £2000- The dividend allowance for the tax year 2020/2021 is £ 2000. This means you can pay yourself a dividend of £2000 without paying any taxes on it. IS THERE ANY TAX MY COMPANY WILL PAY ON THE DIVIDENDS? When a company is giving out dividends it does not need to pay any taxes on it. Company does not pay any National Insurance when dividends are drawn out of it. WHAT TAX WILL BE PAID BY THE DIRECTOR WHEN HE RECEIVES THE DIVIDEND? When tax is paid to the director the director will have to declare it in his annual self- assessment, failure to do so can result in penalties How much tax you pay will depend on which income tax rate band your total income falls into. Basic rate tax payers 7.5% Higher rate tax payers 32.5% Additional rate tax payers 38.1% The personal allowance for the year 2020/ 2021 is £12500. After the personal allowance is used the following thresh holds will apply: £2000-£37500 Basic rate-7.5% £37501-£150 000 Higher rate- 32.5% £150 000- up Additional rate- 38.1% It is a usual practise that the directors of a small limited company pay themselves a small amount of salary and draw the rest of the earnings as dividends to manage their finances tax efficiently. Look at the example below where the director of a limited company with a minimum salary of £8788 (the NI threshold)is getting a dividend of £ 30 000 per annum. How much personal tax will he need to pay to HMRC? Income type Income (£) Income tax rate/ Allowance Tax Liability Salary 8788 Personal allowance Nil Dividend 3712 Personal allowance Nil Dividend 2000 Dividend allowance Nil Dividend 24 288 Basic rate-7.5% 3462 Total Income 38 788 7.5% 3462 Try tax efficient to combine minimum salary and dividend, however, it doesn’t make a very attractive bank statement when you are applying for a mortgage. If you are taking salary more than the NI threshold and you need advice in managing your financial liabilities it will be worth considering a professional financial advice. We at Taxaccolega have an expert team of accountants and we will give you advice tailored to your personal circumstances and business If you want us to do your self-assessment Call us at 020 8127 0728 or drop us a message here and we will get back to you. CTA Box See How Much You Can Save CALL NOW Take the stress out of UK taxes and accounting today — speak with a top-rated Taxaccolega chartered accountant for personalised advice tailored to your business or personal needs. Book a free Consultancy Related Posts ID Verification × ID Verification Form For Companies House From 18 November 2025, UK law will require all company Directors and Persons with Significant Control (PSCs) to verify their identity with Companies House. Companies House will issue a personal code to PSCs. Taxaccolega (ACSP) can help collect data and assist. Please answer the questions and upload documents. Personal Details Fornames * Last Name * Date of Birth *
How can I minimise my taxes on my property income?
How can I minimise my taxes on my property income? There is a simple rule if you have income you have to report it to HMRC and if you have profits you should pay taxes. If you fail to do so on time you have to pay heavy penalties. There is simply no escape. So for example, if you are a landlord you will have to fill in self- assessment tax return annually unless you are managing the property through a limited company. All the expenses, income, profit should be reported to HMRC. If you are a landlord and need help in filling the self-assessment tax return you can contact Taxaccolega and we can help you with that. However, there are ways in which you can reduce your tax bill. Some of them are discussed below. Claiming Allowable expenses: There are certain expenses which can be deducted from the taxable profit thereby reducing the tax liability. If you fill in self-assessment annually you can claim these expenses in the annual return however, in case you manage your property through a limited company you will be able to show these expenses in the annual accounts. HMRC has provided a list of expense and they are as follow: ● Advertising costs of the property ● Telephone bills- the cost of the calls or text messages made in connection with the rental property(some people prefer to keep a separate phone for the business purpose) ● Accountancy fees ● Letting Agents fees ● Cleaning costs of the property ● Other service costs ● Any insurance costs (such as building or content insurance) ● General repair and maintenance cost ● Costs incurred in travelling to and fro to the rental property for the purpose of the business ● Any stationery expenses ● Council tax bills or any utility bills if they are paid by the landlord according to the rental agreement. WORK FROM HOME EXPENSE: An allowance of £4 per week that is £208 per annum which can be claimed by the landlord as an allowable expense. He is considered to be `working from home` for tax purpose. RENTAL LOSSES CAN BE ADJUSTED AGAINST THE RENTAL INCOME: If you have any losses in the previous tax year and you have not realised those losses, you can carry those losses forward and adjust against the rental income. The losses will reduce the profits and therefore tax liability. If you think you might have had losses in the previous years and you did not fill the self-assessment you can contact Taxaccolega and we can sort it out for you. INCORPORATING A COMPANY: If you incorporate a company you might be able to reduce your tax liability because of the following: Finance Cost: If you manage your property through a company you can deduct the interest payments on the mortgage as an expense in your annual accounts however, this is no more allowed if you fill in self-assessment annual return. Corporation tax rate: The rate of corporation tax for the tax year 2020/ 2021 is 19%. This means if you are renting the property through a company. The company will be paying 19% on the profits generated from the rental properties. If we compare this rate with the personal tax rates, which will be applied on the rental income, this is definitely less. For more information on filling the tax return and paying the tax visit our website here. LETTING EXPENSE: If your rental property is empty for a certain period of time and still you are paying utility bills and council taxes or spending some money maintaining it you can claim these expenses. These expenses can be deducted when coming to the profit figure. AVOIDING PENALTIES: Last but not the least you should submit all your returns on time in order to avoid penalties. If you are late in submitting your returns or annual accounts you will end up paying extra costs in addition to the taxes. To know more about fines and penalties click here. For more advice tailored to your special circumstances you can contact us at 020 8127 0728. We can also help you with transferring your property to a limited company and explain the reliefs available to you. If you have any enquiry related to that please call us or fill in the contact form here and we will get back to you. CTA Box See How Much You Can Save CALL NOW Take the stress out of UK taxes and accounting today — speak with a top-rated Taxaccolega chartered accountant for personalised advice tailored to your business or personal needs. Book a free Consultancy Related Posts ID Verification × ID Verification Form For Companies House From 18 November 2025, UK law will require all company Directors and Persons with Significant Control (PSCs) to verify their identity with Companies House. Companies House will issue a personal code to PSCs. Taxaccolega (ACSP) can help collect data and assist. Please answer the questions and upload documents. Personal Details Fornames * Last Name * Date of Birth *