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Buying My Parents' House

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  • Buying My Parents' House

    Hello Everyone,

    My parents are moving overseas, and want to sell me their home, in London.

    The propert was originally worth £230,000 and they took an interest only mortgage at the time to buy the house.

    I'm in full time employment, on £41,000 a year, and have £40,000 deposit as a downpayment as well, this would be the first home I'm purchasing.

    The question is, if my parents would like to sell their house to me, is it just as straightforward as me getting a £230,000 mortgage out and buying it off them ? or are there hidden costs/taxes involved (seeing as the property is probably worth more than that in the market nowadays).

    I am aware of stamp duty, but my main concern is because the property is more worth in the market nowadays I would need to pay some other form tax or other on the property, would this be the case ?.

    Any advice is welcome, thank you in advance.


  • #2
    Re: Buying My Parents' House

    I'm not a tax expert but as far as I'm aware there are two things to be aware of here:

    Firstly any gifted value in the property (i.e. the difference between purchase price and market value) could be subject to inheritance tax in the event of your parents' deaths if the total value of their estate at the time is above the IHT threshold. you need to speak to a tax adviser or accountant regarding this.

    Secondly, and more important, is the possibility that there may be a suspicion of tax fraud if you are buying a property at below market value. If the true value is, for example, £300,000 and you are buying the property at £230,000 then the difference in Stamp Duty is huge (£2,300 against £9,000). There could be a question over whether you are buying at a low price simply for avoidance of stamp duty, and that is a serious offence to be accused of.

    You need to discuss this with your solicitor / conveyancer to make sure everything is done correctly, and unfortunately you may have to pay stamp duty on the market value even if you are buying at a lower price.
    Property for sale in Torquay



    • #3
      Re: Buying My Parents' House

      Thanks for the advice IFA, I'll certainly do some asking and talk to the solicitors about both points, but mainly the 2nd point (1st point is probably not applicable).


      • #4
        Re: Buying My Parents' House

        Do your parents need the money to buy their next place? If not why dont you just pay their mortgage?

        you will definately need some inheritance tax advice from a tax accountant if you are worried about getting caught buying at BMV.


        • #5
          Re: Buying My Parents' House

          All great advice particulary from IFA. Good luck with this
          Best wishes

          Sean Hughes

          Independent Financial Adviser