Inheritance tax help

brian01 · 23 February 2008 at 7:34PM

my sister and i inherited a house with a piece of land from my brother when he died in december 2004, the value of both for probate was £220,000.00. we sold the house in may 2006 for £100,000. and my self and my sister had half of the money each my sister then died in 2007 and her share of the land then passed to her daughter. because we were having problems selling the land as a neighbour was disputeing our access to it we had to spend a lot of money sorting this out with solictors ect, after this we applied for and got planning permission on the land.
we now finally have a buyer for the land at 190,000.00 how do we calculate the inheritance tax on this

whatatwit · 23 February 2008 at 8:45PM

Do you mean Capital Gains Tax on the sale?

brian01 · 23 February 2008 at 8:49PM

i am not sure i thought it was inheritance tax but am a novice as i have never inherited any thing in my life before

whatatwit · 23 February 2008 at 8:57PM

As far as i know, Inheritance tax is payable by the estate, before it is distributed to the individuals.
If you then sell your inherited house or land, you are liable to Capital gains tax.
To get a bit more info for when one of the experts comes along, was the probate value split between house and land...or just a global figure.

brian01 · 23 February 2008 at 9:01PM

yes the valuation was for both the house and the land, i am the executor of the will but had to sell the house and divide the money up on the house as my sister was diagnosed with lung cancer in oct 2005 and died in june 2006

whatatwit · 23 February 2008 at 9:05PM

Oh, how awful for you. I am sorry.

I'm sure one of the resident experts will be along to help out and ask for any more info.
(your other thread question I can manage).

CLAPTON · 23 February 2008 at 10:20PM

if the total estate was 220,000 in 2004 then presumaby there was no HT to pay (sorry I've forgotten wath the IHT allowance was in 2004).

Anyway the IHT issues are now closed.

So if you sell the land now there may be a capital gains tax issue.

What was the value of the land in 2004?

If that was 120,000 and you each inherited half then your share was worth 60,000 .

If the land has now been sold for 190,000 then the gross gain is 190,000 -120,000 = 70,000
you can deduct the costs of selling and the cost of the dispute with your neighbour etc

lets suppose that was say 6,000

so gain is now 64,000

so your share is 32,000
you have a 9,200 cgt allowance so the net cg is 22,800

so tax is 18% of 22,800 if you sell after april.

if you are married you have transfer half your share to your wife and she can use her 9,200 allowance too, but you must do this before you sell.

Elaine_Wilson · 24 February 2008 at 12:51AM

You sold the house in May 2006 (for £100,000). What did you and your sister put on your 2007 tax returns?

You inherited a half share in a house and some land. You sold the house. This is a part disposal for capital gains tax purposes. The probate value of the house alone would be calculated as £220,000 x 100,000 / (100,000 + L) where L is the market value of the land in May 2006.

The balance of the £220,000 would be deemed to be the cost of the land and that is what you should use in calculating the gain on the sale of this land.

The rest of the calculation will depend upon whether the exchange is before the 5th April when the rules change.

brian01 · 24 February 2008 at 8:52AM

the land is only registered in my name not my wifes or my niece, this was done by the person who delt with the probate. we have to pay out about £25,000 in bills, as we had to pay a neighbour for a right of access footpath to the land which was £5,000, as part of the planning application, solicitors costs come to £7000 to sort out the dispute with the neighbour and £3000 Ground investigations works planning cost about £4000 estate agents £4000.00 plus approx £1500 solicitors costs for the sale, if the sales should go through before the 5th of april what will i have to pay tax on. prior to the divide.

CLAPTON · 24 February 2008 at 10:39AM

what was the value of the land for probate purposes in 2004?

you are saying that you are the sole owner of the land?
so why will there be a divide?

and your costs are £49,500?

brian01 · 24 February 2008 at 11:00AM

when my brother made his will he made myself and my sister his sole Benificeries and making me his executor, my brother died in Dec 2004 the house and land were valued at £220,000 and the house was sold for £100,000. but because of the dispute with the neighbour we could not sell the land. when my sister died in january 2007 she left her estate to her daughter. but the land was only registered in my name along with the house when the probate was done by the company we employed. upon the sale of the house 50% of the sale went to my sister.
as the land is now able to be sold 50% of the sale of the land has to be given to my sisters estate in compliance of my brothers will and then on to my sisters daughter in compliance with my sister will.
the land was never independantly valued seperately from the house, until after planning had been approved in June 2006 when it was valued at £200,000. we now have an offer on the land £190,000
hope this makes it clearer.
Prior to my brother owning the house it had been the family home since 1965 and was passed to my mother and brother in 1970 by my father

Inheritance tax help

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