Capital gains tax

[Coffeelover98]

I have never really thought about Capital gains tax. However my grandma has recently passed away and it has been decided that we sell her property. She and my late grandad bought it over 60 years ago. The more I try to understand about CGT the more unfair it seems why should we be taxed on something my grandparents worked hard for and wanted to pass on.

It wouldn’t be subject to CGT, it would be inheritance tax. If your grandparents were married and beneficiaries are children or grandchildren there would be no tax payable unless the estate is worth over 1 million. Anything over 1 million is taxed at 40%

This will be IHT that is charged at 40% over the free thresholds, are you the executor? You need to fill out an iht 400 form to get probate. Get 3 valuations on the property and you have to write and do a correction if it later sells for more.

There won't be CGT on it, but I'm afraid I can't agree with the stance that GPs "worked hard" for property inflation, or that you shouldn't pay tax on a windfall coming from their hardwork tbh.

CGT won't apply but, I guess you don't agree with inheritance tax either.
We are all taxed for all the money we work hard to earn because this is how society works. You grandparents worked hard for the initial purchase of the house but the value of this house is not what it was 60 years ago. And that has nothing to do with their hard work. You also didn't work hard to get an inheritance.
I am currently selling my property and pay CGT on the difference between purchase price+improvements and final sale price. So I am retaining my original investment and paying taxes on what is essentially a free bonus through property price inflation. Seems perfectly fair to me.

It's £325k per person, not £1m. Potentially £650k if inheriting from both grandparents.

Ah sorry I wasnt clear the house has now psssed to myself. However from what I have read as this property isn’t my main residence CGT would be due when I sell it.

There COULD be capital gains tax due on it, depending on the value at the time of their death (ie when you officially inherited it) and when you get round to selling it. We've had similar in my family with my Mum and Auntie who inherited my Great Aunties's house.

For an inherited property you only pay capital gains tax on the increase on an asset since you owned it. So you’re only paying capital gains tax on the gain your grandparents didn’t “earn”.

I am not knowledgeable here but surely the CGT would be on your capital gain, not theirs? So the difference in value between when you inherit and when you sell.

Only on the gain since you inherited it. Which it should be IMO, for the reasons PP explained. That's certainly nothing to do with GP's "hardwork".

They may have worked hard to buy the property in the first place but the subsequent increase in value is just good luck. That gain has never been taxed so seems fair for it to be taxed now. Surely £325k plus 60% of the remainder is a nice inheritance nonetheless??

I think you've chosen exactly the wrong example if you're trying to suggest CGT is unfair.

Taking out the idea that it's probably IHT rather than CGT - assuming that we're talking CGT.

If this property was purchased 60 years ago, its value has appreciated far more than inflation.

The average house price in 1964 was £3360. If that asset had appreciated in line with inflation, it would be worth nearly £84,000 today.

Instead, the average house price is £282,000.

So the majority of the gain from that asset is the result of market forces and has never been taxed - unlike the income that bought the property in the first place or the income that pays rent. There isn't a particularly compelling reason to exempt the unearned income from gains in the value of capital from tax while subjecting other forms of income to tax.

Now if you want to argue that there should be an indexation allowance in CGT for properties held for more than 20 years, then I'm sympathetic to that. But the majority of the gain with long-held property is not inflation.

If you inherit it and sell within a short period, there are exemptions. You are only liable to be taxed on any increase in value between the point of inheriting it and selling.

Guess everyone has there own view but no I don’t see it as fair to be taxed on money that was already taxed at the point of earning ie inheritance tax (which we didn’t have to pay by the way)
yes the property may not be at the same value however money has been spent for the upkeep etc just feels like the government tax working people at every chance they can.

Just read your update OP. YABextremelyU - what have gains on house prices after your GPs' deaths got to do with any hard work on their part??

Sorry just read your updated post - you're only talking about CGT from the time you inherited it to now?

You certainly didn't earn that gain - you inherited an asset, why would you not expect to pay taxes on any gains you make from that asset?

But most of the value wasn't taxed at the point of earning it, and you're only taxed on the gain. That's the point.

Its pretty much the opposite of a tax on work - it's a tax on money gained that was not the result of paid work (taking inflation out of the picture - as before I'm quite sympathetic to an indexation allowance.)

enjoy your windfall rather than whining about tax?
you’re GPs may have worked ‘hard’ but so have many people, and it was a lot easier to buy a house back then…

Your entire argument is wrong. Aside from the correct advice you've already received about IHT and CGT. Every worker is taxed on the wages they EARN from their HARD WORK. Usually Inheritances and gains due to property inflation are just luck and nothing to do with hard work, so if anything should be taxed more highly than wages which actually do derive from hard work!

That’s a people-with-money problem. Not many will be sympathetic… give it to charity? That way you can avoid worrying about taxes.

I personally don't think it's fair that you've been handed lots of wealth you haven't earned, but that's my cross to bear. Stop whinging and look at it from the point of view of those who will never be in your privileged position.

So you inherited a property without any tax and now you're whining about paying tax on the unearned gain between their death and your disposal? OK.

Yes the government can and do tax people every chance they can, this is how our society functions and things get paid for. Do you not think that you should contribute fairly?

Your argument makes no sense.

Even if you had just inherited cash instead and put it in a high interest account, you would have still been taxed on the interest.

Thats how tax works.

Why do you think you shouldn’t be taxed on what is now your investment, just because you initially inherited it?

No, you are getting monies on which YOU have never been taxed on and neither has the house price inflation...

My DD will probably pay IHT, but she will get around around 500k tax free and pay 40% on the reminder, not a bad days work.

Doubtless you want to be seen quickly at AE, get a F2F GP appointment, children to have a good education, have pothole free roads, get care when your elderly?

All these things require people to be taxed.