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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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A house (part of a larger estate) was valued for probate in

Resolved Question:

A house (part of a larger estate) was valued for probate in July 2013 at £285000. Inheritance tax was paid and grant of probate obtained. The house has now been sold for £313000 (before selling costs).
Is this at a at which I should be paying 40% IHT on the increase? Or , as property prices have generally increased in the intervening period, should I account for the increase by paying Capital Gains Tax, which would be more favourable?

Thanks
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

If the house has been a second home since grant of probate obtained and you have not lived in it and made it your main residence, then the gain would be chargeable to CGT.

You will take the selling costs from your gain (313,000-285,000) = 28,000 and also gains annual allowance of £10,900 and the balance will be charged to CGT at 18%, 28% or a combination of both depending on your taxable income in the year.

You will not pay IHT at 40% on the gain. IHT would have been paid out of the estate.

I hope this is helpful and answers your question.


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Customer: replied 3 years ago.

I was concerned that HMRC could argue that the original probate valuation was too low. Is this not a possiblity?

 

Phillip

Expert:  taxadvisor.uk replied 3 years ago.

Phillip, thank you fo ryour reply.

You should not be concerned about it... the price could have gone down... would HMRC refund the tax collected?

I presume valuation done was by professionals and supported. HMRC could have challenged it at the time if it was undervalued.

I hope this is helpful.


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