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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I inherited a small family property in 2001 the value being

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I inherited a small family property in 2001 the value being approx £90.000. The property was rented until 2012 during which time I paid income tax on rental earnings. I estimate to have spent £ 15000 on improvements. I have never lived at the property and now considering selling. The market value is in the region of £160.000. How much CGT would I have to pay ?

Can you tell me the month in 2001 that you inherited the property, the month it was first let during your ownership of it and the month in 2012 that the letting ceased please. Was it let more or less continuously save for changes of tenant?
Customer: replied 3 years ago.

Inherited property in September 2001.first let in November 2001 on 6 month tenancy agreements .There were breaks of up to 2 months between tenants until May 2012. Incidentally the property is jointly owned with my wife, does this make any differance.


Leave this with me while I draft my answer.
Customer: replied 3 years ago.


Hi again.

As the property is jointly owned, each of you and your wife will make a gain of £27,500 should you sell it for £160,000 (£160,000 - £90,000 - £15,000 / 2). The first £11,000 of your respective gains will be tax free so you will each be left with a taxable gain of £16,500. You can claim a deduction for the costs of selling the property (legal fees, selling agent fees etc) which will reduce the gain further. The tax office may ask to see proof of the improvement expenditure in the form of receipts and invoices and may disallow any that expenditure that you cannot prove.

There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your respective incomes in the tax year that you sell the property. Assuming you sell it in the current tax year, 2014/15, one of the following scenarios will apply to each of you respectively:

1 If your income including the taxable gain is £41,865 or less, all the taxable gain will be charged to CGT at 18%.

2 If your income excluding the taxable gain is more than £41,865, all the taxable gain will be charged to CGT at 28%.

3 If your income excluding the taxable gain is less than £41,865 but more than £41,865 when you add the taxable gain some of the taxable gain will be charged to CGT at 18% and some will be charged to CGT at 28%.

I hope this helps but let me know if you have any further questions.
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