capital gains tax

trishf · 10 October 2009 at 12:55PM

advice please I am a 61 year old housewife a none tax payer living in private rented accomodation for the past 15yrs
In february 2009 i inherited my late Uncle's house,who died in 2004 and it took the solicitor until 2008 to discover that i existed . Valuation at the time of his death was put at £55k now the value is £87,995.00.
If i sell the house would i have to pay capital gains tax on the profit, if so how much would i pay after deducting my personal tax allowance.
Also are there any other things e,g, solicitors /estate agents costs ect.i can offset against this tax .
If i decided to live in the property would i avoid paying cgt and does a time limit apply for you to take up residency

fengirl_2 · 10 October 2009 at 4:53PM

Yes, you would have to pay CGT on the profit. The first £10,100 this year is exempt and the rest is charged at 18%, giving a liability of about £4120 if you sold at the price stated. You can offset legal and agents fees against the gain. There is no connection with Income Tax - CGT is entirely separate.
You can take up residence at any time, but CGT will still be chargeable on the period during which you didn't live in it when you come to sell it.

trishf · 10 October 2009 at 5:57PM

Thank you for your reply could you please explain to me if i go and live in the property over what period would the capital gains tax apply

roger_c · 10 October 2009 at 7:49PM

You mention that you may use it as your 'main home'. If you choose to do so, you should write to your tax office to let them know that you wish to 'nominate' this house as your main home. Then when you come to sell the house, the last 36 months of ownership (whether you live there that long or not) / 'total period of ownership' will be exempt from CGT (plus any months in excess of 36 months if you live there longer).

You will need to complete a tax return to report the capital gain to HM Revenue & Customs, therefore it would be advisable to seek an accountant, they will be able to discuss the relief you may be eligible for with regards to living in the house (known as Prinicipal Private Residence (or PPR) Relief).

trishf · 10 October 2009 at 8:57PM

thank you for your reply however although my Uncle died in 2004 his house was not legally signed over to me till Feb 2009 so what date would proof of ownership start . My uncle left no will and solicitors did not know of my exsistance until 2008 and then they had to try and find me and i being the only surviving blood realative inherited all his estate so which date would i have owned the property from would it be 2004 when he died or would it be Feb 2009 when his property got transfered to me .

fengirl_2 · 10 October 2009 at 9:18PM

You will not have to nominate your uncle's house as your main residence if you go to live in it as this is the only house you own.
Your ownership would start from the date he died.
If you go and live in the property, the period during which you did not live in it would attract CGT.

trishf · 10 October 2009 at 9:47PM

thank you for your reply but help please i dont understand if i went and lived in the property say next week what is the period that would attract the cgt would it be from 2004 when he died up till the day i moved into house or would the period start from Feb 2009 when the property was transfered into my name until i moved in there

p00hsticks · 10 October 2009 at 11:41PM

trishf wrote: »

thank you for your reply but help please i dont understand if i went and lived in the property say next week what is the period that would attract the cgt would it be from 2004 when he died up till the day i moved into house or would the period start from Feb 2009 when the property was transfered into my name until i moved in there

I can't answer your question I'm afraid, but just to make clear that any capital gains tax would only be due when you actually come to sell the property - if you go to live in it then you don't need to worry about it at present.

trishf · 11 October 2009 at 8:50AM

Thank you for your comments actually the house is in a good state of repair and there has been several improvements made to it added a new kitchen and bathroom and central heating and yes it has taken a year or so to complete but it has been finding the time to go there. It really was never an issue about tax being saved it was more about some security for when my husband retires so that we would not worry about how we would find the rent after all it seems silly paying out rent when you own a property and of course we would be leaving family behind so i have looked into selling the house that is when the cgt came into question but if i sell the house there is nothing in the area where we are living that i could afford because house prices here are to expensive and i wouldnt have enough money So at the end of the day would you choose security or cash?

trishf · 13 October 2009 at 9:30AM

Thank you for all your comments i have decided to put the house up on the market and try and find a property elsewhere with the money(that's if the house sells in these uncertain times.) It was never about how much tax could be saved but since i have been told that cgt would have to be paid on sale thats when i posted the thread for a did not understand cgt Does anyone know if i would be able to appeal against this as it has not been my fault that no one found me until 4yrs later and during this time property prices increased but it would save me a bit of money to put towards another property that we could go and live in,this freeing up the rented accomodation and giving someone else a chance of a home.What goverment office /department would you have to make an appeal to?

00ec25 · 13 October 2009 at 2:40PM

I appreciate this may sound harsh but please!
if its not about saving tax then why are you asking about appealing? The fact it took four years to find you has, in reality, seriously worked to your advantage. Yes it means the gain is now taxable, and no you cannot appeal it, but the tax rate is now only 18% of the gain, 4 years ago CGT rate was 40% of the gain.

you now have an asset which has risen in value by four years and of the rise you will get 82% of it and thus be 82% better off when you sell it than had you inherited and sold it four years ago.

as stated if you move into the house and live there as your main home then you can claim 3 years of CGT exemption. However, as per your decision that is physically not a realisitic proposition just to save a bit of tax, so pay the 18% on the value it has gained in the last 4 years and be grateful to your uncle and the solictor for finding you. You will inherit £55K tax free and pay 18% on the difference between 55 and whatever you sell it for (after deducting all costs of selling), you will therefore inherit at least £80k in cash, and pay around £4k in tax. I don't think £4K is going to make much difference to the sort of house you can afford to buy

capital gains tax

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