How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4807
Type Your Tax Question Here...
bigduckontax is online now

I inherited a property from my mother several years ago. The

This answer was rated:

i inherited a property from my mother several years ago. The estate was well below the inheritance tax threshold at the time. I have since let the property and paid tax on the rent. I have never liked the property and have a chance to sell it. I have been told on here before that there will be no tax due on the sale. If I use the money to purchase a buy to let property, and later sell this new property, I assume that any profit from this new property would be subject to any capital gains payable at the time?
Thank you
Did you ever live in the property after you inherited it from your mother before you rented it out? Once I have this information I can assist you further.
Customer: replied 2 years ago.

no, I have never lived there I have my own house

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to assist you with your enquiry.

When you sell the existing prpoerty you will be laible to Capital Gains Tax (CGT) on any gain made. The gain is calculated by determining the acquisition and disposal values. The former is the probate price from your mother's estate on demise plus any improvements eg installation of double glazing, central heating, extensions but not routine maintenance which is allowable against the rental income for Income Tax purposes. The disposal price is the net sum recieved after deduction of estate agent's and solocotors' fees, advertising etc. Take one from the other to obtian the gain subject to CGT, deduct your Annual Exempt Amount (AEA) of 11.1K and the balancce will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. Unfortunately, as you never lived in the residence, you are not entitled to Lettings Relief which can be substituted for the AEA up to 40K.

Exactly the same will happen CGT wise when you buy and ultimately dispose of your buy to let property. You could try to get HMRC to accept Rollover Relief, which merely postpones the CGT from the first sale until a later date [the sale of the new property], but as the first property was not used for holiday rental lettings the application of this relief is debateable.

I regret to have to tell you that you are in for a CGT bill. I am so sorry to have to rain on your parade.

Customer: replied 2 years ago.

Thank you, ***** ***** that. I think I am right in saying that I will have no cgt to pay? The value at my mum's demise was £125,000, as she died when prices were high, and I am selling for £131,000. There has been little rise in the price of this property since then. Taking off the sales cost, my actual gain since inheriting will be about 5k. I won't have any problem in confirming those values as they are genuine, so am I correct in thinking that I have escaped the CGT?

Your estimated capital gain is 131K - 125K = 6K; well below the AEA (and we have not deducted the selling costs), so as, you surmise, although the gain is subject to CGT, there will be nothing to pay.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax and other Tax Specialists are ready to help you
Thank you for your support.