Would a property gift be liable for tax?

Q If my parents give me their house I am aware of the implications on capital gains, but if they continue to live in it rent free would there be a tax liability on me in lieu of the rent I should receive for the property? BR A You are right in thinking that a capital gains tax (CGT) bill can arise when someone makes a gift of an asset such as property based on its open market value, but it is the giver who pays the tax not the recipient. In your parents' case, however, if the house they are thinking of giving you has been their main home for all the time they have lived in it, they should be exempt from CGT if they give it away or sell it. If you were given the house and then let your parents live in it rent free, you will not be liable to any income tax. However, your parents' estate could be liable to inheritance tax (IHT). Giving something away and then continuing to benefit from it, which is effectively the situation if your parents give you their home and carry on living in it without paying rent, counts as a "gift with reservation" for the purposes of IHT. This means that on each of your parents' death the value of the house would be included in their respective estates for the purposes of IHT, even if the house was in your name. On the first death there would be IHT to pay at 40% on the proportion of their share that exceeded the available nil rate band. If it was less than the IHT nil rate band the unused proportion would pass to the survivor. On their death IHT would be payable at 40% on the excess of the nil rate band at the time, plus the unused proportion of the nil rate band carried over from the first spouse.