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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I mother died Nov. 2012 - her flat was then valued at 150K

Customer Question

I mother died Nov. 2012 - her flat was then valued at 150K of which I inherited 1/3rd share.
The flat is now being sold for 200K of which I will receive 1/3rd share.
Before the flat could be sold a new lease was required - my share of that cost was 20K.

So could you advise if capital gains tax will be have to be paid. in this case.

many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

On the assumption that you did not occupy the flat yourself, then Capital Gains Tax would be due.

However, the capital gain is 200K - 150K = 50K, 1/3 of which is 16.7K [rounded figures]. Your share of the lease cost would inflate the purchase price by 20K and eliminate the capital gain. That assumes that HMRC will accept that the lease cost against capital gain. I suspect that they will wish it to be offset against your share of rental income from the property.

That might leave you in a worst case scenario with a capital gain of 16.7 - 11.1 [your annual exempt allowance] = 5.6K, worst case exposure is 1K tax (at 18% unless you are, with the gain, in a higher tax bracket) in which case the tax would be levied at 28% = 1.85K.

I do hope I have thrown some light on the nightmare of capital gains tax.

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