Selling an inherited house.

shazronnie

We inherited a house when my father in law died. It took nearly a year for all the solicitors stuff to be sorted regarding the estate.
We then spent months doing it up and never actually moved in, we rented it to some friends who have been there for 6 months and now want to buy it.
My hubby has something in his head about inherritance tax... the house is probably worth £150k
Would it be a straight forward sale?





Thank you

bryanb

If you have owned it without living in it capital gains tax could be due if the gain exceeds your CGT allowance.(Unlikely with present house prices) Any inheritance tax due should have been sorted already, as part of the probate etc.
Is the rental all above board? Tax etc.

shazronnie

We have not paid tax yet as it has only been rented out for 6 months, thank you for your advice what is the proceedure? We are not looking to con anyone but want to sell the house legally.

bryanb

shazronnie wrote: »

We have not paid tax yet as it has only been rented out for 6 months, thank you for your advice what is the proceedure? We are not looking to con anyone but want to sell the house legally.

I believe you just need to declare the income from renting in the normal way on your tax return, less expenses etc.
I presume that you had a valuation when you inherited, which would form the basis for assessing CGT using present value. Could even be a capital loss.

00ec25

IHT - I can't remeber the rules now as it's 7 years since I did this myself but on the IHT guidance there was somethiong about what happens if you sell the property within x years of the death for more than the original probate valuation. This may mean the IHT calculation will have to be redone using actual sale price rather than the probate (estimate) value. Obviously if the total value of the estate is well within the IHT threshold then there is no need to rework this if it will not make any difference. If IHT has already been paid then you will need to check this out as I haven't got the time to revisit the HMRC guidance to tell you!

CGT will be based on the difference between the recorded probate value and what your friends actually pay you for it. (obviously if the IHT calculation has been reworked then CGT will be irrelevant since they are paying you the market price used in the IHT calculation and there is no gain in which case you will be worse off since CGT is 18% so it is better to have to pay CGT based on a probate value than IHT @40% based on the actual sale price)
If CGT is applicable you can deduct the costs of selling from this (ie. your legal fees, I assume you will not use an EA). Once you have the "net gain" figure you can deduct your personal annual CGT exempt allowance (10,100) and as you have hinted at joint ownership of the property ("we inherited"), then half the gain will go against you and you can knock off your 10,100 from that and half will go against your OH who can also knock off 10,100. The remaining amount will then incur CGT (currently) @18% which you will have to pay split 50/50 between you

re the rent then Income tax is due as stated on the net profit after deducting allowable costs

you will each need to do your own SA tax return for the period you let it covering your half of the income and also, if applicable, when it is sold the CGT pages of the return covering your respective halves of the CGT.

timmyt

00ec25 wrote: »

IHT - I can't remeber the rules now as it's 7 years since I did this myself but on the IHT guidance there was somethiong about what happens if you sell the property within x years of the death for more than the original probate valuation. This may mean the IHT calculation will have to be redone using actual sale price rather than the probate (estimate) value. Obviously if the total value of the estate is well within the IHT threshold then there is no need to rework this if it will not make any difference. If IHT has already been paid then you will need to check this out as I haven't got the time to revisit the HMRC guidance to tell you!

CGT will be based on the difference between the recorded probate value and what your friends actually pay you for it. (obviously if the IHT calculation has been reworked then CGT will be irrelevant since they are paying you the market price used in the IHT calculation and there is no gain in which case you will be worse off since CGT is 18% so it is better to have to pay CGT based on a probate value than IHT @40% based on the actual sale price)
If CGT is applicable you can deduct the costs of selling from this (ie. your legal fees, I assume you will not use an EA). Once you have the "net gain" figure you can deduct your personal annual CGT exempt allowance (10,100) and as you have hinted at joint ownership of the property ("we inherited"), then half the gain will go against you and you can knock off your 10,100 from that and half will go against your OH who can also knock off 10,100. The remaining amount will then incur CGT (currently) @18% which you will have to pay split 50/50 between you

re the rent then Income tax is due as stated on the net profit after deducting allowable costs

you will each need to do your own SA tax return for the period you let it covering your half of the income and also, if applicable, when it is sold the CGT pages of the return covering your respective halves of the CGT.

IHT - that is optional, if you sell for less. The OP is not clear. Lawyers sroted what out? Has it been assented to the beenficiaries, and the beneficiaries now wish to sell in their own name. Well there is no IHT issue as it is not connected with the estate anymore being post - the assent.

if no assent, why not and the lawyers have not sorted it out.

C_Mababejive

If i were you i would decline the offer to purchase and continue to rent it.

That way,you still own it,its asset value increases and you still get rental income.No brainer.

Fire_Fox

shazronnie wrote: »

We have not paid tax yet as it has only been rented out for 6 months, thank you for your advice what is the proceedure? We are not looking to con anyone but want to sell the house legally.

Bit off topic but have you complied with the other legal requirements, gas safety certificate, deposit lodged etc.?