Paying Capital Gains - Do I have to?

montySweden

Hello

Myself and 2 siblings owned my mothers house before she died earlier this year. While we intend to sell the property it has now come to light that we will probably have to pay capital gains tax since we all own our own properties as well, and this is considered a second property. Is there anything we can do to avoid paying or reduce the Capital Gains Tax?

dunstonh

Is there anything we can do to avoid paying or reduce the Capital Gains Tax?

Nothing that is reasonable. Its a bit late after the event.

How did you all end up owning your mother's house?

nokiauk

a lot depends when you all took ownership and how much the property has gained in value if anything it may have lost given the current market.

in any case the 1st £9600 is exempt for all of you as you get an allowance.

i'm in a similar position, I only received ownership in April 07 and have recently sold the property as a cheap price.

my lawyer has said due to the market I have likely not had a capital gain over the 18 months ownership and if I have will be within the £9600 bracket.

Therefore I won't pay any capital gains.

montySweden

I think when my father died my mother gave us ownership of the house. She must have thought it was a good idea at the time, maybe to avoid us all having to pay tax. But, I've since learned, this may have not been a good idea.

We took ownership about 5 years ago - if that's any relevance.

Thanks for your input.

dunstonh

Yes it was a bad move. Was the property clawed back into the estate for IHT purposes as it fails to be a potentially exempt transfer as she was still getting benefit of the gift? (or was estate plus property value less than the threshold)

nokiauk

5 years is quite a long time, still hard to say how much value has increased
This is the way I see it

House price in 2003 - £150k
Sold price in 2008 - £200k

Gain of 50k which is split x3. = £16,666.66

Each of you have an allowance of £9600 so gain reduces to £7066.66 each

You pay CG tax at 18% so that would mean a tax bill of £1272 each.

Very rough but should enable you to get the idea.

montySweden

CG tax...Oh!

I was under the impression, due to my ignorance in the matter, that we would be charged CG tax for the whole amount!

Incidentally, it was about 15 years ago my mother gave us the house..I think it was about 90k then and now valued at around 145K.