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Sam, Accountant
Category: Tax
Satisfied Customers: 14200
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My sister and I were given my parents house 10 years ago. The

Customer Question

My sister and I were given my parents house 10 years ago. The property was worth £150,000 at the time. Both my parents were alive and living in it. My father passed away 4 years ago, after my sister and I paid for him to reside in a nursing home for the final year of his life. My mother passed away last month. We were made an offer of £350,000 for the property. How much Capital Gains Tax would we have to pay on the property.
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

First I would like to offer my condolences for the recent loss of your mother.

The capital gain will be the sale price (assuming this is near to the market value that the property could achieve on the open market) and the value at the time it was gifted to you, so £200,000

This determines a gain of £100,000 each for you and your sister, of which for each of you the first £11,000 is exempt (as this is your annual exemption allowance) and assuming it did not become either of your main residences during the period of ownership, then no tax reliefs are due.

Which leaves each of you with £89,000 to be considered for capital gains.

The rate of capital gains, is determined by your annual income.

if you annual income is in excess of £41,865 - then the gain of £89,000 will be liable at 28% = £24920
If your annual income is less than £41,865, then any unused basic rate band can be allowed to charge the equivalent amount of gain at 18% and any remaining gain at 28%
For example, annual income of £30,000 would mean there was £11,865 basic rate band unused.
So the first £11,865 of the gain would be liable to 18% and any remaining gain (in this case £77135) at 28%

I assume the solicitor dealing with your mothers estate was aware of the gifting of this property ( as was your fathers solicitor) as this would have been treated as a gift with reservation for Inheritance tax purposes, as your parents continued to make use of a property that they had gifted, and this might have Inheritance tax implications.
Of course if they paid you market value rent - then there is no further concerns, other than for your fathers estate - as it was less than 7 years from the date of making the gift until his passing. But I imagine this was all dealt with at the time.

Do let me know if you have any follow up questions

Thanks

Sam