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Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
Yes, you each have a liability for half the gain on the property on sale and each have an Annual Exempt Amount (AEA) , currently 11.1K, to offset this. The gain is calculated from the difference between the net selling price and the acquisition price. The former is what you receive for the house less cost of sales including advertising. The acquisition price will be the probate value plus any improvements eg installation of double glazing, central heating extensions etc, but not routine maintenance. This gain, half each as I explained, will be taxed at 18% or 28% or a combination of the two rates depending on individuals' income including the gain in the tax year of sale. I have assumed that the house was never let out or lived in by either of you. Please advise on this point. Also, did your father leave the house 100% to your mother?
In any event you will not be liable for the full gain as for the last 18 months of ownership you are deemed to be in residence even if this is not the case and Private Residence Relief (PRR) is extended.
For starters your brother who lived in the house all the time is entitled to PRR which relieves CGT at 100%. He has no tax liability persuant to the sale.
Yes, those are enhancements rather than maintenance. The gain is 625K - 400K - enhancement costs divided by three. Each share (excluding the resident brother) is adjusted by a factor of the date of your mother's death, the date of sale (to give an occupation time) say A in months. Then take A, deduct 18 to give B. B / A of the gain less the AEA each is the proportion exposed to CGT. This will be taxed at 18% or 28% or a combination of the two rates depending on the individuals' income including their share of the gain in the tax year of sale.
The 18 is the PRR for the last 18 months as I explained earlier.
The AEA is the Annual Exempt Amount, a non cumulative entitlement which is given to CGT payers to offset that tax.
You would be liable for CGT in the year of sale, but on the gain between the death of your mother and the sale date less the last 18 months when you are deemed to be in occupation even if this is not the case. Total ownership was 76 months, knock off 18 leaves 58 so 58 / 78 = say 75% of the gain less the AEA is exposed to the tax.
No, you are only liable for tax in the year of sale on the gain made over the period of ownership. That is how CGT works and always has.
Not quite, the AEA is 11.1K so only 37.4K is exposed to CGT; worst case scenario is a tax bill of some 10.5K each.
The will trust will not affect the position, it is only there to assist in the distribution in the longer term.
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Thank you for your excellent support.