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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My sister and I recently inherited a house from my father.

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My sister and I recently inherited a house from my father. We had been given half the house about 8 years previously when my mother died - at the time the house was worth £440k so we owned £220k's worth. When my father died last year the house was valued for probate at £500k, so we didn't pay inheritance tax as £500k - £280k (my fathers "share") was less than the £325k limit. Now the house has just been sold for £590k and I am not sure how we calculate CGT. Do we pay on £590k - £500k, i.e. £90k or do we take into account the fact that we already owned half the house? Also, as the house sold for so much more than the probate value, could we up that figure to say £550k and so pay less CGT as we will have made less profit?


Can tell me exactly when last year your father died please. Was the property professionally valued at the time your father died?


For CGT purposes, the cost of the property is £470,000 (£440,000 / 2 + £500,000 / 2). That's £235,000 for each of your and your sister.

You would need good evidence that the property had been undervalued for probate purposes to use a higher than probate value figure as HMRC may enquire into the figures which is an increasing event with property gain declarations. Property prices have increased in recent times and it may be that your buyer is particularly keen not to miss out or you have an aggressive estate agent. I would suggest you ask the agent if the property was undervalued at £500,000 when your father died and consult your solicitor about having the probate value changed if there appears to be a case.

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

Customer: replied 2 years ago.

“I understand the calculation thank you. But I also know as I’m sure you do that estate agents as a matter of course will give a low probate value to help keep inheritance tax to a minimum. We don’t need to pay inheritance tax as we already owned half the property. It is also unreasonable to think that the value of the house could have increased from £500k to £590k in less than a year. So, to get a more accurate probate value, do we need to go back to the estate agent who gave us the first one or can we go to the estate agent who sold the house. We would prefer the latter. Once we have a revised figure, what do we need to do with it? Is there a government department we need to contact to change it or a form to fill in or does it need to be done by a solicitor? If so, does it have to be the same solicitor who handled the probate before?”

HMRC can and do take a dim view of anybody they think has manipulated a property value to save on IHT, even more so if they then want that changed for CGT purposes. I realise in your case, there would be no IHT even with an increased probate value.

The probate value should have been done correctly initially as any change is likely to attract the attention of the tax office and a referral to the District Valuer who will put their own value on the property which you may disagree with. The DV has access to records of property sales so they are able to argue a good case.

If I were you, I'd contact the solicitor who handled the estate initially see if the probate value can be amended upwards. I know it can be done in the reverse situation where a property has been sold at a discount to the probate value because of a deterioration in the property market within a certain period following the death so that a repayment of IHT can be claimed. You should get a couple of reliable valuations done to back up your view.

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Customer: replied 2 years ago.

I'm not suggesting we "manipulate" the probate value. I'm suggesting we "correct" it as it was evidently too low in the first instance. Correcting it will be to our advantage which is good but I can't really see how we are doing anything either immoral or illegal. Do you see it otherwise?

No, I don't see it otherwise. All I was saying that there could be IHT consequences if such an amendment occurred but that won't be the case in your situation.

My advice to any executor is to ask an estate agent for an accurate valuation as it is the executor who signs off the HMRC forms.
Customer: replied 2 years ago.

OK thanks for your help.