capital gains

wilson1973

If you inherit a house from a parent what happens with capital gains tax i may be wrong but it seems to me that you pay it with regards to the difference in value from the date of death valuation to the time the house is sold so if it was 5 or 10 years later there would be a good chance in an increase in value,so would it be sensible to sell as soon as possible as the price would be about the same and hence no gains tax,does anyone know if i have the right idea,by the way i have always lived with my parents in the said house and im not subject to inheritance tax.

Pumpkinface_2

Yes your understanding is correct.

Although if you continue to live in the house and do not have another house designated as prinicpal residence, then you should also be exempt from CGT if you sold 5 years down the line.

I am not sure what you mean by "I'm not subject to inheritance tax". Did you just mean your parent's estate is below the IHT threshold?

Rolo_Tomasi

wilson1973 wrote: »

so would it be sensible to sell as soon as possible as the price would be about the same and hence no gains tax.

If there was a CGT bill it would mean that there was an increase in value and the tax is only a maximum of 18% of this increase. Therefore if the property increased in value by £50k there would be a CGT bill of £9k but you are still £41k better off than if you sold the property immediately.

wilson1973

Thanks...I see so if you stayed in the house for another 30 years they would still be after capital gains tax even then.Its a trick one a house would rise in value quite a lot in that time and in that respect 18% is quite a lot

Rolo_Tomasi

No. If you lived in the house there would be no capital gains tax to pay because it is your residence. I was just trying to point out that if ever there was then getting 82% of something is better than getting 100% of nothing.

wilson1973

Hi yes i knew i would be ok if i stayed in the house i just thought if i stay here and then say moved in 30 years time for arguments sake that could well be a large amount if 18% of house price rises is taxed for cap gains,or do you not pay it if you stay in the home for a number of years,does anyone know how many years you have to stay in the house before you can sell to avoid capital gains

Pumpkinface_2

In general terms, if a house you own is your principal residence for some years and isn't for others, then the gain upon sale is pro rated and some of it may be chargeable to CGT. Other factors come into it as well, such as last few years of ownership and letting relief if you rented it out, but I won't go into these as seems this is all hypothetical anyway.