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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
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Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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Rakhi Vasavada, You recently answered a question on CGT on a

Hello Rakhi Vasavada,You recently answered... Show More
Hello Rakhi Vasavada,You recently answered a question for me on CGT on a property inherited from my Aunt....summary below...
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09/07/2016 11:01
• My Grandfather and my Aunt lived in a...
• My Grandfather and my Aunt lived in a property in Farleigh Road, Warlingham.
• In his will my Grandfather stated that the property be shared 50% / 50% between my Dad and my Aunt and on the proviso that my Aunt could live there for as long as she wanted.
• My Grandfather died in 1999 and at that ... view full
09/07/2016 11:0109/07/2016 11:18
Rakhi Vasavada Rakhi Vasavada Financial Professional
Dear Friend,Hello and welcome. Thank you for providing an opportunity to assist you.Yes, it would be perfect to say that you all have made a Capital Gain as you inherited your property. Now, let me try and throw some light on the extent of your capital gain.If you sell the property without having made it your own home, there could be CGT to pay, and this will be based on the increase in value between the date of death and the date when you sell.Having said this, when your Aunt passed away in February 2015, the value of the property was 320,000 (160,000-80,000-80,000). This would form the basis of your calculation of Capital Gains Tax.Now, you sold this property at 400,000 in February 2016. You will take into account NET Proceeds. i.e. 400,000 minus 8000 of costs, i.e. NET 392,000.The DIFFERENCE i.e. 392,000 - 320,000 (Value at the time when you inherited the property) would attract the capital gains in the proportion of the amount received by you all three.For example, So far as your father is concerned, it would be 196,000 minus 160,000 i.e. Capital Gain of 36,000. You received "X" amount from which you will deduct YOUR COST i.e. 80,000 from that and that will form your capital gain and so on.The point I am trying to drive home is that you pay CGT when you eventually sell the home, and this will be based on the increase in value between the date they gave you the property and the date you sell.CGT would be 18% in case if you are a standard rate tax payer or 28% if you are a higher rate tax payer.Would the £400,000 not be split 50 : 25:25 and then whoever paid the costs have that deducted from their share?Also - could you please advise on any IHT implications in the February 2015 Will and what if ant IHT my father might have to pay on property sale £196,000 and remainder of estate £ 78,000??
Submitted: 8 months ago.
Category: Finance
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Rakhi Vasavada, Financial Advisor
Satisfied Customers: 4526
Experience: Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
replied 8 months ago.

Dear Friend,

Hello and welcome again. Thank you for your appreciation. Sorry for a day's delay in replying back as I was travelling.

YES -- that is what I meant. 400,000 would split 50:25:25 and each individual will arrive at a amount of capital gain. Out of this, each one of you will deduct the amount of spent as cost and thus arrive at TAXABLE Capital Gain amount.

IHT implication would be similar on the remainder of estate of 78,000. That is being inherited by your father in full and he will thus arrive at a capital gain on that amount separately from the sale of house. Again, whatever asset this 78,000 is -- its fair value at the time of transfer to your father will form the cost basis for calculating the gain.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer reply replied 8 months ago.
Hello and thank you for your reply.
My question was, would have any IHT to pay? I understand he will pay CGT if he sells the goods.
Rakhi Vasavada, Financial Advisor replied 8 months ago.

Dear Friend,

Hello and welcome again. Sorry if I missed out our question.

From what I understand from your situation, no IHT becomes payable. Once you’ve received your inheritance, you may have to pay either income tax, capital gains tax or both, depending on what you do with your inheritance. In your case, since the property was not a income generating, it will be subject to only Capital Gains Tax.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

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