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bigduckontax
bigduckontax, Accountant
Category: Tax
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here I have an inherited property in joint ownership with

Customer Question

Hi here I have an inherited property in joint ownership with my brother. It was valued at £250thou. when we inherited it and is now valued in the region of £275thou. Can you tell me what I would be expected to pay in tax. and is there anything I can do to position myself better for when I do sell the property.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Assuming that you do not occupy the property as your sole or main domestic residence, then you would be liable to Capital Gains Tax (CGT) on any gain made on sale. However, you are deemed to own 50% of the property so only half the gain would fall to you. At present the gain is of the order of 25K, of which your half is 12.5K. You have an Annual Exempt Amount (AEA) of 11K [14/15 rates] which reduces your gain to some 1.5K. The gain would be adjusted by a factor which you derive as follows. Take the sale price and deduct selling costs. Take the probate value, add the cost of any improvements eg installation of double glazing, central heating, extensions etc and the difference between the two id the actual gain for CGT purposes. Also, in the last 18 months of ownership you are deemed to occupy the property even if this is not the case. So take the total ownership period in months, deduct 18 from this figure and that derived figure over the total ownership period gives a factor to apply to the gain to reduce it. Any gain would be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. Worst case scenario is a tax of under 0.5K.
Of course, if you have occupied as your sole of main domestic residence you would be entitled to Private Residence Relief which is at 100% of any gain.
If the property has been let at any time in your ownership you would be entitled to Lettings Relief up to 40K instead of your AEA.
As it stands at the moment your exposure to CGT is very low. I do hope I have been able to help you with my answer.
Customer: replied 2 years ago.

thank Keith for your reply. I take it you only get one AEA . This isn't a separate one for CGT I can use is it?
If I am on a salary of 40K and taking 6k rent a year. do you still think My CGT would be under 0.5K. When/how would I use the letting relief instead of AEA. alan

Expert:  bigduckontax replied 2 years ago.
As its name suggests it is an annual allowance and only applicable to CGT. Currently it is 11K and goes up to 11.1K next tax year. It is a use it or loose it allowance [HMRC speak].
I would suggest that Lettings Relief will completely eliminate any liability to CGT on current figures.
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Customer: replied 2 years ago.

Ok So AEA is for CGT and separate from my tax free Personal Allowance which is for income tax.

Expert:  bigduckontax replied 2 years ago.
Income Tax and CGT are two entirely different taxation regimes and you have an entitlement to both Personal Allowances and AEA, if appropriate.. They only come together for the assessment of CGT tax rates which I told you about in my original answer.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.