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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15982
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Mum and dad owned a house but were not married. Mum died

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Mum and dad owned a house but were not married. Mum died first and left her half of the house to me, they had tenants in common, it was left to her estate and I am the only beneficiary. We had the house valued at the time and I paid inheritance tax on her half. Dad has now died several years later, his half of the house is left to me too, with his half of the house I will not need to pay inheritance tax as it does not exceed the allowed amount. My question is.....if my mothers half has increased in value, which it has will I be liable for any taxes, I.e. Capital gains tax. I Could not sell the house for 20 years as my dad lived in it and I wasn't able to sell for this reason.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

The cost of the house for CGT purposes is the sum of the value of the half you inherited from your mother at the time of her death and the value of the half you inherited from your father at the time of his death. There is no relief for the fact that your father continued to live in the house I'm afraid.

I hope this clarifies the matter for you but let me know if you have any further questions.

Customer: replied 1 year ago.
Sorry don't understand. Fir instance her half for inhertence tax purposes was valued at £175000 but her half is now worth about 300000..... will I have to pay CGT on 125000?Thanks

The house is one unit for CGT purposes. Deduct the combined probate values for each half from your potential sale proceeds and you have your gain. So, yes, you will pay CGT on £125,000 less selling cost and the annual CGT exemption of £11,100.

Customer: replied 1 year ago.
What is the rate please?
Customer: replied 1 year ago.
Even when I have only just inhereited the property. I haven't rented it?

There are two rates of CGT on residential property gains, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year you sell it. Take a look here for instructions on how to work out hoe much CGT you will pay at each rate.

If you live in the property, then you will qualify for some main residence relief. See HS283.

Customer: replied 1 year ago.
How long would I need to live in it?Thanks

You can't make the gain go away simply by living it for a short while and if you move in simply to get some main residence relief, HMRC will seek to disallow such a claim. See example 4 in HS283.

Customer: replied 1 year ago.
Thought so! If I pay basic tax as a self employed person will the CGT be at 20% do with 11,100 relief 113,900?

Put the figures asked for in the calculator here to get an idea of your CGT.

I said CGT on residential property was charged at 18% and 28%, not 20%. Most of your gain will be taxable at 28%. The most that can be taxed at 18% is £32,000 and that will reduce by £1 for every £1 of income you have over £11,000 (the personal allowance for income).

Customer: replied 1 year ago.
Sorry my error, last question I promise!Will I pay this when I do my dads probate? Or when it is actuslly sold, if when sold which will then be in a couple of months how do I go about paying it? Thanks

It has nothing to do with your father's probate assuming the property is sold by you after it has been out into your name and not by his estate.

You pay CGT on 31 January following the end of the tax year in which you sell the property. So, if you sell it as soon as you have 100% ownership and by 5 April 2017, you will pay any CGT due on 31 January 2018.

Customer: replied 1 year ago.
Thank you. What a mine field


Would you mind rating my answer before you leave the site please.

Customer: replied 1 year ago.
Sorry can I ask one lady question?Once I have completed my dads probate (he will not be paying any tax as it is below 325000) and then had the whole property transferred into my name will I then get stuck paying CGT on this whole amount because it's in my name if it take me s year to sell it?

The IHT and CGT positions are completely seaprate.

IHT is paid by deceased estates. You said your dad's estate has no IHT liability.

You have inherited the second half of the house. You do not pay CGT unless you sell or give away an asset. You don't pay CGT simply because the asset is now in your name alone. I said earlier that if you exchange contracts to sell by 5 April 2017, then any CGT liability will be payable on 31 January 2018. Just to repeat, you do not pay CGT until after you have sold or given away an asset.

You pay CGT on a capital gain. Take the disposal proceeds and deduct the costs of selling the property. You then deduct your "cost". Your "cost" is the sum of the probate value for the 50% you inherited from your mother and the probate value of the 50% you inherited from your father. That gives you the gain. Deduct £11,100 (the annual CGT exemption) and you are left with the net taxable gain. You do not pay CGT on £325,000 unless that is the net taxable gain. The IHT nil-rate band of £325,000 has nothing to do with CGT.

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