Homing in on retirement income

Published on Friday 8 February 2008 21:31

Q I AM a 65-year-old widow living in a townhouse now worth around £700,000, but I have little in the way of income. Could I sell some or all of the house to my son – and main heir – while continuing to live in it until my death?

RB, Edinburgh

AIF YOU have lived in the house as your only or main residence throughout your ownership, any gain on disposing of, say, a 50 per cent interest should be free from capital gains tax (CGT) under the principal private residence (PPR) relief provisions.

Assuming that the other 50 per cent is retained by you up until your death and forms part of your estate for inheritance tax (IHT) purposes, it will benefit from a CGT-free uplift to its probate value.

Your executors or beneficiaries of your estate will then pay CGT on a subsequent disposal on the increase in value since your death.

It is unlikely that PPR relief would be available on this disposal. It should be noted that the retained 50 per cent interest is likely to be discounted by, say, 10 per cent to reflect what will then be joint ownership with your son.

Your son will, however, not be able to benefit from any PPR relief on a disposal at any time of his share in the property if he does not live in it.

&#149 If you have a question, write to Rosemary Gallagher, Personal Finance Editor, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail: [e-mail]. No responsibility for loss occasioned by any person acting, or refraining from acting, as a result of these answers can be accepted by Grant Thornton or The Scotsman Publications Ltd