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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Inherited house in 2006 with sister from parents price £500K

Customer Question

Inherited house in 2006 with sister from parents price £500K now worth £770. Agreed at time that sister would live in house with her family until I settle down This happened last year and we agreed to sell the house split the result and then purchase our individual homes I have not held a regular job and have used my savings and done odd jobs to get by. As a home owner and need to purchase a new home am I subject to Capital Gains Tax.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me if you have lived in the house for any length of time since you inherited a share of it? Do you own another home at the moment?
Customer: replied 2 years ago.

No and No

Customer: replied 2 years ago.

the answer is No to both questions

Expert:  TonyTax replied 2 years ago.
Thanks.

Since you have not lived in the property, your share of any gain will be subject to Capital Gains Tax I'm afraid. Assuming your sister has lived in the property during the entire period she has owned a share, her share of any gain will be exempt from CGT.

If you sell the property for £770,000, your share of the gain will be £135,000 assuming the probate value was £500,000. The first £10,900 will be exempt which will leave a taxable gain of £124,100.

There are two rates of CGT, 18% and 28%. The rate or combination of rates you will pay will be dependent on the level of your income in the tax year of disposal of the property. Assuming you sell the property in the 2013/14 tax year, one of the following scenarios will apply:

1 If your income in 2013/14 including the taxable gain is £41,450 or less then all the taxable gain will be taxed at 18%.

2 If your income in 2013/14 excluding the taxable gain is more than £41,450 then all the taxable gain will be taxed at 28%.

3 If your income in 2013/14 excluding the taxable gain is less than £41,450 but more than £41,450 when you include the taxable gain then part of it will be taxed at 18% and part at 28%.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

I have not worked in all this time to pay tax. How does this affect the situation

Expert:  TonyTax replied 2 years ago.
It means that you will pay less tax than if you had an income in the same tax year as you make the gain. The lower your income is, the greater the amount of the gain that will be taxable at 18% as opposed to 28%.

A maximum of £32,010 of the gain can be be taxed at 18% in 2013/14 if your income is less than the personal allowance of £9,440. Each £1 of income over £9,440 reduces the amount of the gain which will be taxable at 18% by £1.

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