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Joshua, Lawyer
Category: Law
Satisfied Customers: 32228
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Do I need to pay capital gains tax if I pay off the mortgage

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hi, do I need to pay capital gains tax if I pay off the mortgage on a property?
JA: Where are you? It matters because laws vary by location.
Customer: Greenford, Ealing
JA: What steps have you taken so far?
Customer: I have some money from my late husband's estate to pay off a mortgage in his sole name
JA: Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: I am the administrator because he did not leave a will

Hello and thank you for your question. My name is ***** ***** I will be very pleased to assist you. I'm a practising lawyer in England with over 15 years’ experience. Please be aware that although I will endeavour to reply to you promptly, I am also in full time private practice and so I may not be available to respond immediately and it may also take me a few minutes to prepare a reply. The site will notify you as soon as I respond. I look forward to working with you to answer your question fully.

please accept my sincere condolences for your loss.

  1. May I confirm if this relates to the property that you live in or another property such as an investment property your husband owned please?
  2. is your husband's estate liable to inheritance tax so far as you are aware?

Customer: replied 15 days ago.
Just for investment, no inheritance tax because it was below the threshold

thank you. A capital gains tax does not apply in relation to assets when summary passes away. This is because there is a relief in respect of capital gains tax in the circumstances to ensure that the situation does not arise where the state may be liable to both inheritance tax and capital gains tax.

Accordingly, the way in which these two taxes work together is that for the purposes of capital gains tax, the value of the asset or property in question is uplifted and rebased as at the probate value that you provide for the property on the estate return.

by way of example, if we pretend that the property was purchased some years ago for £100,000 and was worth £200,000 when the owner passed away and will be sold in five years time for £250,000, then capital gains tax would be worked out on the basis of the difference between £200,000 being the value as at the date the owner passed away and £250,000 being the value we are pretending the property is worth at the time of sale; not the difference between the acquisition value of £100,000 and the sale price of £250,000 as would usually be the case.

This is because as discussed above, the base value for capital gains tax is uplifted to the value as at the date the owner passed away.

There is therefore no capital gains tax to pay in relation to paying off the mortgage and any capital gains tax that may or may not be due in the future would be based on the difference in value as between the probate value and any eventual sale in the future.

Joshua and 2 other Law Specialists are ready to help you
Customer: replied 15 days ago.
Thanks, ***** ***** I have some clarity and understanding
Customer: replied 15 days ago.
I did not realise in time that accepting a phone call offer will inccur extra charges Also, I have cancelled the membership since I will not be needing further help at this moment, thanks

I'm glad the above answers all your questions for now. If you have any follow up questions please revert to me.