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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My husband passed away in November 2015 and left the house

Customer Question

My husband passed away in November 2015 and left the house in trust for his 3 children (one of whole is my daughter and lives in the house with me) and I am allowed to stay in the house for life or until I decide to leave it when it will be sold and the trust paying each of the three children. My daughter and I have the opportunity to buy out the other two shares in the house. I have been told "If (my daughter) were to ever leave the property capital gains tax would be payable on her share if it sold for more than the date of death value as she would no longer qualify for the main residence exemption." I don't understand this - what would be her liability for Capital gains tax please?
Submitted: 11 months ago.
Category: Tax
Expert:  taxadvisor.uk replied 11 months ago.

Thank you for your question..

A gain from sale of residential property is chargeable to CGT.

There are reliefs and allowances available against this gain if certain criteria is met

100% private residence relief is available against the gain if the property remains your main and only residence for the whole period of ownership.

Provided the property remains your daughter's main and only residence from the time she has inherited it to point of sale, there would be no CGT payable as it would be covered by private residence relief.

For CGT purposes, the gain would be the difference between the net proceeds from sale and the value of it at the time of death.

In the event your daughter decides to move out of the property and sell it at a later date, then her private residence relief would be calculated based on the period the property has been main residence out of total period of ownership.

Any gain not covered by PRR would be chargeable to CGT. She would be entitled to gains annual allowance (this tax year it is £11,100) and the balance would be taxed at 18%, 28% or a combination of both depending on her taxable income including the gain in the year of sale.

More information on private residence relief is covered in HS283 here

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief

How CGT is calculated is covered here

https://www.gov.uk/capital-gains-tax/rates-6-april-2016

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

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Customer: replied 11 months ago.
Excellent thanks, ***** ***** this.
Expert:  taxadvisor.uk replied 11 months ago.

I thank you for accepting my answer.

Best wishes

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