CGT on inherited house

[raybarrow]

Hi Folks,

Bit of heads up on where to start please.
Last parent, Dad, died Mar 2008. House passed to us, 3 brothers. We have a signed agreement for a straight 3rds split. Older brother died and his share passed to his daughter, new agreement signed. We have rented it out but now have it on the market for sale.

Sale price should net us about £85K each, if all goes well! I know it's a big if.

Where do we start looking with CGT? I presume there is a threshold but I imagine it's variable depending on any number of things.

If it turns out we are below and CGT not payable, would we still have declare it (I do Self Assessment) and let HMRC make the decision?

Any pointers where to start would be appreciated.

Ray.

[genou]

Hi Folks,

Bit of heads up on where to start please.
Last parent, Dad, died Mar 2008. House passed to us, 3 brothers. We have a signed agreement for a straight 3rds split. Older brother died and his share passed to his daughter, new agreement signed. We have rented it out but now have it on the market for sale.

Sale price should net us about £85K each, if all goes well! I know it's a big if.

Where do we start looking with CGT? I presume there is a threshold but I imagine it's variable depending on any number of things.

If it turns out we are below and CGT not payable, would we still have declare it (I do Self Assessment) and let HMRC make the decision?

Any pointers where to start would be appreciated.

Ray.

You each have a 12.3k exempt amount. You and your brother have a base cost of 1/3 of the value of the house at the date of your Dad's death. Your niece has a base cost of 1/3 of whatever the house was worth when your brother died.

So 85k - ( 1/3 value at Dad's death ) = your/brother's gain of which 12.3k is exempt ( assuming no other gains )

85k - ( 1/3 value at brother's death ) = your niece's gain, of which 12.3k is exempt ( assuming no other gains ).

Simplified - if you are basic rate taxpayers you pay 18% on the gain above 12.3k, but it gets complicated as the gain and your income interact to work what the CGT rate is : https://www.gov.uk/capital-gains-tax/rates

You will need to make an immediate return on residential property - https://www.gov.uk/report-and-pay-your- ... april-2020

[raybarrow]

Thanks Genou,

That will get us started. The bit about our neice's position didn't occur to me but it makes sense. Of course it all may change come the Chancellor's speech later this month.

Cheers,
Ray.

[raybarrow]

Hi Folks,

Bit of a shocker on the CGT threshold dropping in April 2023. Still it is what it is.
Dad moved into home and elder brother, now deceased, stayed in the family home (he was over 60 so allowed to live there - house didn't have to be compulsorarily sold to fund Dad's care) till he moved in with daughter. Need to check date when he moved out but think it was after Dad died.
Is the starting date house value when Dad died or when elder brother moved out leaving the house empty? Or is it again not that simple? I know we will have to take proper advice when the time comes, but forarmed is forwarned.

Ray.

[DrFfybes]

As Genou says - you (presumably) inherited the house when your father died (rather than it being a gift during his lifetine, else that would be the date on record) and the value at that date is the relevant one. Similarly for your neice. You could pay a surveyor to come up with a valuation, but if it is a property in a development of similar ones then the online "sold house prices" at Zoopla/rightmove should give you a pretty good comparator as they go back 20+ years.

If your brother continued to live there after your father died, that is a seperate issue and any rent or whatever given to you for the period should have been accounted for in the relevant taxt year. If any of the survivors have used it as their main residence at any point since ownership then I'm pretty sure there is still some allowance against their CGT that can be claimed, but what has happened with the property for the last 12 years or so?

There are other allowances to claim - costs of sale, any improvements over the years (but not maintenance), and of course the loss on those old Zombie funds you have lurking in the bottom of your portfolio can now be realised and offset against the property gains.


Paul

[raybarrow]

Hi Folks,

but what has happened with the property for the last 12 years or so?

Property has been rented out legitimately through an a letting agent. I recall that house prices were at a very low ebb at the time my elder brother vacated, so we decide to rent and wait and here we are. Prices are dropping again. Meeting surviving brother tonight to discuss options (niece is happy to go with whatever we decide). Sell regardless or continue to rent. I think we have to ignore the money, as we are all financially ok, and look at our advancing years and do we want the bother of continuing to rent? My feeling is get it all sorted now, then give the money to our children and hopefully stay alive for another seven years.

Ray.

[DrFfybes]

Property has been rented out legitimately through an a letting agent. [...] My feeling is get it all sorted now, then give the money to our children and hopefully stay alive for another seven years.

About 4 years ago my s-i-l (then aged 70ish) decided t buy 2 adjoining properies brand new to rent out. I think the idea was to give one each to her children.

I suggested at the time that it was a job rather than a hobby, but she seemed assured the letting agent would sort it all out. Since then one of her children has got terminal bowel cancer, neither want to take on a rental, and in the last 2 months the builder's agent has sent debt collectors around as apparently she'd only been paying service charge on one of them (for the other one they had been billing the house, not her or the agent) and in the last week or so the electric company started debt proceedings as a tenant that vacated in Summer hadn't sent a closing reading, so they'd estimated the use between tenants at £30, sent the bill to the house, the new tenants threw it away, etc.

Suddenly hassle she doesn't need, on top of family trauma, and the CGT changes have made it all extremely stressful.

Paul

[DrFfybes]

Property has been rented out legitimately through an a letting agent. [...] My feeling is get it all sorted now, then give the money to our children and hopefully stay alive for another seven years.

About 4 years ago my s-i-l (then aged 70ish) decided t buy 2 adjoining properies brand new to rent out. I think the idea was to give one each to her children.

I suggested at the time that it was a job rather than a hobby, but she seemed assured the letting agent would sort it all out. Since then one of her children has got terminal bowel cancer, neither want to take on a rental, and in the last 2 months the builder's agent has sent debt collectors around as apparently she'd only been paying service charge on one of them (for the other one they had been billing the house, not her or the agent) and in the last week or so the electric company started debt proceedings as a tenant that vacated in Summer hadn't sent a closing reading, so they'd estimated the use between tenants at £30, sent the bill to the house, the new tenants threw it away, etc.

Suddenly hassle she doesn't need, on top of family trauma, and the CGT changes have made it all extremely stressful.

Paul

[raybarrow]

Hi,
It's surprising how many things seem too be a 'good idea' at the time.
Ray

[raybarrow]

Hi Folks,

I'm trying to contact the tax office, but it's long wating game.
Possibly an obvious question but related to sale of inherited property. If we sell and make less than the CGT allowance, currently £12,300, do we have to declare, to HMRC, that we don't have CGT to pay? On the normal Self Assessment form I just tick possible taxation options in or out so 'No' seems obvious but houses and CGT have slightly different rules about notifying HMRC if/when CGT is due.

Looking at the poor state of the current market, original value and expenses (making it fit to rent and subsequent sale) it's quite likely with a three way split that we won't breach the £12,300 threshold individually. Come the drop to £6,000 in April 2023 it will be a different ball game.

Meanwhile I hang on the phone listening to classical music...
Ray

[genou]

Hi Folks,

I'm trying to contact the tax office, but it's long wating game.
Possibly an obvious question but related to sale of inherited property. If we sell and make less than the CGT allowance, currently £12,300, do we have to declare, to HMRC, that we don't have CGT to pay? On the normal Self Assessment form I just tick possible taxation options in or out so 'No' seems obvious but houses and CGT have slightly different rules about notifying HMRC if/when CGT is due.

Looking at the poor state of the current market, original value and expenses (making it fit to rent and subsequent sale) it's quite likely with a three way split that we won't breach the £12,300 threshold individually. Come the drop to £6,000 in April 2023 it will be a different ball game.

Meanwhile I hang on the phone listening to classical music...
Ray

You could try the calculator here - https://www.tax.service.gov.uk/calculat ... roperties/ . There would be 3 separate calculations / returns . It should tell you whether you need to submit a return. I've not done one of these but my understanding is that if there is no tax to pay, no 60 day return is required.

You ought to include the sale in your normal return if the proceeds for each of you exceed four times the annual exempt amount (i.e. £49200 at the moment - interesting to see if they are going to require returns for £24k / £12k in the future ). Even then, if there's no tax to pay, if any of you don't normally submit a return, I doubt HMRC are going to get picky about it.