My father passed away in 2003, and everything was transferred to my mother. My mother currently has a buyto-let (BTL) property valued at approximately £500,000 (purchased in 1998 for £85,000). She also has another property which is her main residence and is valued at about the £600,000 mark. She is currently a basic rate taxpayer. What is the best way to transfer her properties to me, to minimise capital gains tax (CGT) and inheritance tax (IHT). Would she be able to gift the BTL to me, and if so would I have to pay CGT and/or IHT?

Arthur Weller replies:
Firstly, the best thing from a tax perspective would be for your mother to leave her main residence, to transfer it to you, and to go and live in the BTL, and hope to live for seven years after the transfer. Since it is her main residence, there should be no (or not much) CGT for her on the transfer, and if she lives for seven years there should be no IHT on the estate when she dies. However, assuming this is not going to happen for whatever reason, she should consider transferring a small amount of the BTL to you every year in a way that the capital gain on that part is less than the CGT annual exemption (currently £11,700). This will save the CGT for her on the transfer, but she would need to live for seven years after each transfer for it to fall out of her estate. Maybe it is worth transferring a larger amount to you, and paying CGT at 18%/28%, and saving IHT at 40%.