Capital Gains Tax on inherited property. Do we pay this?

[HisMoneyMyMoneyCardboardBox]

My husband inherited a house a year ago and its increased in value and it's on the market.

I'm confused if we pay CGT.

We don't own any other properties, we rent. I know if we inherited it and it's not our main then we pay CGT when we sell it.

But is it considered our 'main home' because it's the only one we (he) owns?

Google isn't giving me a straight answer on this. It all seems to be assuming that we live in an owner home and inherited a second and yes we would then pay CGT.

But if we never owned a home and this is the first time do we still pay it?

Who do I ask to find out this question for sure?

[LIZS]

It is not your principal private residence so you are liable. However there are allowances and exemption periods which may offset some of the gain.

[RosaWaiting]

I'd ask a tax lawyer

I think you only pay CGT on the gain that counts from the date you inherited it to the date you sell it.

I don't know if you are exempt due to it being the only one you own. Not sure. But my own experience, when my dad died, they will squeeze tax out of you any way they can.

might be worth a call to the government

www.gov.uk/capital-gains-tax

[HisMoneyMyMoneyCardboardBox]

LIZS my mum mentioned an exemption period. I've googled but can't find anything on this.
Do you known what it is?

[HisMoneyMyMoneyCardboardBox]

RosaWaiting so we can ask the solicitor we employ during the sale?

Do we need to employ a tax lawyer specifically to find out?

[ajandjjmum]

Would it be feasible for the house to become your home for a period of time, which would presumably exempt you from paying CGT?

[HisMoneyMyMoneyCardboardBox]

It's far too small and too far from the kids schools unfortunately. Which is a shame because it's beautiful.

[HighwayCat]

We had to pay CGT on an inherited house, although had rented it out for a few years between inheriting and selling. We didn’t own any other property at that time, but it’s a tax on property you don’t live in. Like pp said, it should only be on the increase since it’s valuation for IHT last year. There were various other allowances which kept the bill minimal but this was a while ago.

[AuditAngel]

I think that the last 18 months of ownership qualify for an exemption (used to be 3 years), but not my area of expertise

[HisMoneyMyMoneyCardboardBox]

They hugely undervalued it.

It could sell and an increased value of £150k which I think would mean 33.5k CGT.

The reason why I ask is because DH sprung this on me last night (about it being hugely undervalued) so it really effects what we look at the buy with the money.

[HisMoneyMyMoneyCardboardBox]

I need to figure out who I ask to get a definitive answer.

[LIZS]

If it was undervalued then it may have affected iht liability at the time of inheritance, so swings and roundabouts.

[LIZS]

The property solicitor is your first port of call. There will be someone in the practice with tax knowledge to advise if needs be,

[HisMoneyMyMoneyCardboardBox]

That's great thank you.

And yes I believe it was undervalued with that intention.

[malovitt]

I rent myself and don't own a property.
I inherited my parents' house three years ago and rented it out until recently.
I have just sold it and had to pay Capital Gains on the difference between the price it was valued at on inheritance and the price it was when I sold it.
There is a disregard of a certain amount (I think it's £12k) then you are taxed 18% ( if not a higher rate taxpayer) on the rest.
I checked with the tax office and was told it made no difference if you rented or not - the house was not your home.

[hocuspocusbitch]

No it's not classed as your main residence because you don't actually live there, but your solicitor you get when you sell the property should be able to keep you right.
I'm a conveyancing paralegal 👍

[ajandjjmum]

Are you allowed to go back and claim CGT for previous years, if you haven't used your allowance? You really need to talk to an accountant.

[notangelinajolie]

Do you have a government gateway id?

If not you can create one and do the whole capital gains tax process online. We did this for my mum's house. The thresholds are pretty high so even if it weren't your only property you may well be exempt. You don't need a lawyer unless it is a really complicated inheritance. It is actually a relatively easy process and at the end you will get either a capital gains exemption certificate or a figure you need to pay.

www.gov.uk/capital-gains-tax

[RosaWaiting]

re the lawyer

what kind of situation are you in? Are you getting a solicitor to help you buy a property?

I'm wondering if you are better just either hiring an accountant, or doing the information on a self assessment tax return.

[HisMoneyMyMoneyCardboardBox]

but your solicitor you get when you sell the property should be able to keep you right.

In what way?

[HisMoneyMyMoneyCardboardBox]

We are hiring a solicitor. I assumed the CGT would be done via him.

We haven't hired them yet as the house has only just gone on and viewings aren't happening for another two weeks. When we get an offer we'll get them in. They need money upfront and we have about 40p

[HisMoneyMyMoneyCardboardBox]

Is it too late to put the house in my name as well in order to make use of my tax relief??

[RosaWaiting]

OP you probably have an option here

you can either pay the solicitor more to sort out the CGT, or you do it via the government links given by a couple of us.

I would really suggest you do it yourself on the government website. Hands up - I've not put CGT on a self assessment form, but the forms do talk you through everything else, so I imagine CGT is the same.

[over50andfab]

OP, re inherited property, the 18 o the exemption (due to be shortened to 9 months. Think from 2020 is for people who lived in their property and then might have rented it out before selling.

I’ve copied this from an article: “At the moment you don’t have to pay any CGT for the years you lived in the property, plus an additional exemption for the final 18 months that you owned it, even if you weren’t living there at the time.”.

So this doesn’t apply to you.

Re the probate value- - yes they tend to be on the low side especially if inheritance tax might be payable at 40%. Has probate been granted? Some people prefer to sell the property first and have to sale value as the probate price. If they don’t get you on one tax they get you on another!

Other things to consider - the first 12k of gain is tax free. You could also consider a deed of variation to the will (with agreement t from all concerned and within 2 yrs of date of death) and have it rewritten to gift the property to your DH and yourself equally. This way you have 2 lots of 12k exemption.

When my mum died the house was left to me and my DB. My brother and family lived there for a few years before it was sold. I was in rental. When it was sold I paid CGT and my DB didn’t.

[HisMoneyMyMoneyCardboardBox]

So we need to get the deeds in my name. I wonder if we can do this in time?!

[notangelinajolie]

OP in terms of difficulty - doing it yourself is about on a par with applying for a passport. It's a box filling in exercise and there is help along the way.