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?

Whoops, yes I should have thought of putting the house into both names - you’ll need a solicitor for that I should think. Then no deed of variation needed.

Also, you can use any associated costs of the sale in CGT calculations. So we included costs of recarpeting part of the house, solicitors and estate agents fees etc in ours.

You can do it yourself (I did). You have to ask for the CGT form to fill in, in the tax year the sale goes through. You’ve been given the .gov link above which is quite user friendly. Or do it yourself, then show it to a sol who deals in taxes to check it

OP who valued the estate?

So who decided to purposely undervalue it to commit IHT fraud?

www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property

I believe the process takes 4-6 weeks. Perhaps the solicitor who will be dealing with the sale of the house could advise further.

Actually it looks like you could probably change the deeds yourself looking at that link.

IOP who valued the estate?*
I've no idea. Not me and not my husband and no one that we chose to employ. It was out of our hands at this point.

OP the executors of the Will would instruct an estate agent to value the property. Was IHT paid? As I said, some value it at the low end to keep this down. But then tax can be paid as CGT on selling it.

Take into account the house hasn’t sold yet and might have now been valued too high!

your DH needs to find out who valued the property. Again, you could ask a solicitor to find out for you, but you will be racking up the costs.

if it's been undervalued to avoid IHT, I wonder if you will end up with a double whammy anyway.

Either that or that have massively over valued it to reel us in! 😭😭😭

I maybe wrong, it is a long time since I studied this, but for tax purposes legal ownership is not the only thing that will be considered. There is also beneficial ownership. So I think by just putting your name on the deeds won't necessarily mean the property sale will be split between you. Think you need to get proper advice for this

Ok first things first. We need to know what stage this inheritance is at and how he came to inherit it.

Was he notified of the inheritance as part of an estate by a solicitor who did all the formalities?

Or has he inherited because it's his parents passed away and he's not yet done anything about making it formal.

No I'd be putting my name on the deeds to make use of my tax relief.

This link, although from 2011, explains beneficial ownership quite well
www.taxationweb.co.uk/tax-articles/property-taxation/capital-gains-tax-and-beneficial-ownership.html

So if the OP and her DH are to both benefit from the sale proceeds I guess they can both be legal owners. And of course there is no tax on gifts between married couples.

Call HMRC they are incredibly helpful, and it costs you nothing.

Check zoopla selling prices nearby out estate agent over valued house to make us pick them. In the end process was reduced to the same as the other estate agents quotes. It ask a couple of other estate agents what they value it at.

You do pay because you don’t live there but you only pay on the increase in value between the point you inherited and when you sell.

I don't understand any of that over50andfab

OP, what do you mean by "reel you in"? Did someone have to persuade your DH to agree to inherit or something?

careful with Zoopla - massively overvalues everything in my block of flats.

No no I mean the estate agent when they did the valuation.

We only did two in the end because PB let us down.

OP, yes it takes a bit of getting your head round. My understanding is that beneficial ownership means those who currently or are going to benefit. So your DH is currently the legal owner of the property, but when it sells you will both (presumably) benefit from the proceeds.

Suggest you either ask HMRC or the solicitor you will use to seek the house.

Just a guess but is your DH the sole beneficiary of the will and is he also the executor?

Basically OP the taxman likes to get as much tax as possible, so by putting your name on the deeds, which may mean you can use your tax allowance as well, they will look to see if you have beneficial ownership.

So if your DH rents the property out and the income goes to a separate account which only he can access, he pays all the property costs and declares it on his tax return. Then when the property is sold and he takes all the proceeds and puts them in his bank account for his sole use, they may argue, that although your name is now on the deeds you don't have beneficial ownership. But I assume in reality you would benefit from the proceeds so they will accept you have beneficial ownership.

No he was neither the sole beneficiary nor the executor of the will.

Ah I see Ineedaholidaynow thanks for explaining!

No he was neither the sole beneficiary nor the executor of the will.

So, first step would be to contact the executor to find out how much the house was valued at when HMRC were notified of the death.

Then you need your estate agent valuations. If the house is up for sale you should use that figure. Final sale price may change that figure but it shouldn't be a significant amount if the house is priced well to sell.

The difference in the 2 figures is what will be used to work out capital gains tax. This will be minus any allowances. I think it is 12k personal allowance. And then tax is 10% payable on what's left. I don't know your personal circumstances so this is all assuming he isn't a higher rate tax payer etc.

Use the capital gains tax calculator on the HMRC site to find out how much he is liable to pay,

Not sure if anyone has mentioned but you will have a CGT allowance of £12K each per year.

If the house was in both your names any gain at £24K or below wouldn't require anything to be paid and if the gain is higher it will be payable less the £24K allowance.

So if it's £150K gain it would be £126K at either 18% or 28% if higher tax payer.

Best to contact an accountant that specialises in tax though.

Which is exactly what I said at 11.02