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TonyTax
TonyTax, Tax Consultant
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My mother owned 2 properties at the time of her death in 1996

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My mother owned 2 properties at the time of her death in 1996 - one of which she lived in and the other which I have lived in with my family since 1975. This property was given to my elder brother and I as a 'Deed of Gift' in about 1990. Her property was sold off after her death, settlement of Inheritance Tax, etc and the proceeds were split, more or less 60 /40% in my brothers favour.
We are now contemplating 'downsizing' and agreeing a settlement with my brother. Am I likely to have to pay CGT when we sell the house??. I need to know this as it may well effect the deal I can agree with my brother?
Rodney Kilbee
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

For Capital Gains Tax purposes the cost of the property will the value when it was gifted to you and your brother in 1990.

As you appear to have lived in the property for the entirety of your period of part-ownership of it, your share of any gain will be exempt from CGT as it has been your main residence. Your brother's share of the gain will be taxable with the first £11,000 being tax free.

There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that your brother will pay on his share of any gain will be dependent on the level of his income in the tax year during which the property is sold so one of the following scenarios will apply if the property is sold in 2014/15:.

1 If his income in 2014/15 including the taxable gain is £41,865 or less, then all the taxable gain will be taxed at 18%.

2 If his income in 2014/15 excluding the taxable gain is more than £41,865, then all the taxable gain will be taxed at 28%.

3 If his income in 2014/15 excluding the taxable gain is less than £41,865 but more than £41,865 when his share of the gain is added, 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 3 years ago.

Thank you - very helpful - what about Inheritance Tax??


Rodney Kilbee

Expert:  TonyTax replied 3 years ago.

You aren't intending to make a gift to your brother as he owns half the property so all you will do when you sell the property is pay him his share of the proceeds. Inheritance Tax doesn't come into it.

 

One thing that you said in your question which needs clarification is that you said that when your mother died in 1996 she owned two properties, the one she lived in and the one you live in now, but that this property was gifted to you and your brother in 1990. Was the property gifted to you and your brother or not?

Customer: replied 3 years ago.

Yes the property was gifted to us in 1990.


 


Many thanks


 


Rodney Kilbee


 

Expert:  TonyTax replied 3 years ago.
Thanks for the clarification.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15883
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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