Annie Shaw: Your money problems solved

Annie Shaw / 18 May 2018

This month Annie looks at capital gains tax on a property owned by a father and son, why a pensioner has such a small state pension, and if car insurance is cheaper for one than two



Question

My elderly neighbour, a widower, has put his son’s name on the deeds to his house and made them joint owners. The property is ex-council, bought under right-to-buy with a maximum discount. The value is now in excess of £300,000. How much capital gains tax will the son have to pay when the house is eventually sold? It is the son’s second property, as he does not live there.

Answer

I’m assuming the enfranchisement period is past (during which the discount, or part of it, is refundable to the council if the house is transferred to someone else), so the son will have to pay capital gains tax (CGT) of 18%, or 28% if he is a higher- rate taxpayer, on the difference between the value of his share of the property at the time his name was put on the deeds and the date of sale. He can deduct from that figure his annual CGT allowance of £11,700 (2018-19), assuming he has no other gains that year, and expenses associated with the sale such as legal work and estate agent’s fees. If a valuation was not obtained at the time of transfer, it can be worked back using house-price indices.

Your neighbour will have had his own reasons for putting his son’s name on the deeds, but if it was in an attempt to avoid paying for long-term care, it probably won’t work because there appears to be a deliberate intention by him to deprive himself of assets. This means that the manoeuvre will be ignored, or a charge put on the property, which will be released only when it is eventually sold and the fees for care repaid to the local authority.

If the plan was to avoid inheritance tax, it was unnecessary as the property’s £300,000 value is well within the nil-rate band, especially as there is now an extra allowance that could in future bring the band up to £1 million for a family home. Moreover, since your neighbour continues to live in the house it is a ‘gift with reservation of benefit’ and the value of the property would not escape being included in his estate for IHT purposes if he were liable.

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Question

I am 72 this year and have drawn a very small state pension for almost 12 years (currently £35 a week). I understand that, as my husband is younger than me, works three days a week and will not receive his own state pension for another three years, I cannot have a full pension. Is this correct? We know some other couples – albeit unmarried – who are in a similar situation to us and who get a full state pension despite not having made full nationaI insurance contributions. I despair of ever getting the full amount.

Answer

It looks as if you either paid a ‘married woman’s stamp’ – a reduced-rate contribution available to spouses until the 1970s – or have spent a lot of time out of the workforce and failed to make voluntary contributions or obtain credits. Either might mean you don’t have full pension entitlement in your own right.

How to boost your state pension

When your husband reaches state pension age, if the reason for your low pension to date was that you paid a reduced stamp, you may be able to claim an increased amount of pension based on your husband’s contributions. This concession is available only to certain women, as the ability to use a spouse’s contribution record was abolished for people reaching state pension age from April 2016. If you survive your husband, your own pension will go up, either to an amount based on his NI record or, if your income and assets are low, because you will become entitled to Pension Credit. Do contact the Department for Work & Pensions on 0800 731 0469 about your situation.

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Question

My wife no longer drives. Will removing her name make the insurance cheaper?

Answer

Will your wife never drive again, for instance because of a medical condition? If she simply prefers not to, might remaining on the policy be potentially useful in case she ever needs to drive in an emergency?

As for the cost, you need to ask your insurer – your cover may not cost less with your wife’s name removed and might even become more expensive, depending on your profile. Insurers seem to think drivers will take more care when their partner is on the policy and, as long as they are accident-free, may charge them less – it can also be worth putting a parent on a young person’s car insurance to lower the cost.

Annie's tips on cutting the cost of your car insurance

When insuring young people, do not be tempted to put the insurance into the parent’s name with the child as second driver. Adding a parent’s name to a policy is quite different to pretending the parent is the main driver of the vehicle if they are not. That is known as ‘fronting’ and is fraud.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.