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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4198
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My father owned two houses. One in Portugal and one in England.He

Customer Question

My father owned two houses. One in Portugal and one in England.
He decided to sign the house in England over to his four children two years ago so that we are now the owners.
He has recently died. My mother continues to live in Portugal and has no need for the house in England.
If we agree to sell the house that we own, how much would we have to pay in Capital gains tax and inheritance tax please. The house is valued at about £600,000.
Many thanks
Susan
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello Susan, I'm Keith and happy to help you with your question.

There is the possibility of Capital Gains Tax (CGT) for you and your siblings. Inheritance Tax (IT) kicks in at 325K at 40% flat rate on any surplus over that in your father's estate. You may inflate that 325K by any bequests to charity which escape IT.

CGT will be charged on the profit [gain] realised between the selling price less costs and the value as at the time your father gifted it to you. This profit is chargeable a quarter each and you and your siblings each have a 10K Annual Exempt Allowance to set against the gain. Before any tax charge can be estimated I would need to know the value of the property as at the date of donation.

Hope I have thrown some light on your problem. It spans two types of tax and they are mutually exclusive, except for the PET. The news may not be particularly good. By making the gift to you your father created a Potentially Exempt Transfer (PET) for IT purposes and PETs run off over 7 years. The value of his gift is added back to his estate less 20% (assuming he passed away over 2 years after the gift was made). PETs are the first items to suffer IT and if the estate is inadequate to may these then it cascades down to the beneficiaries for immediate payment.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.