inherited house ?

metrobus

If I left my son my house in my will
is there a time limit where after which he would not pay
capital gains tax if he sold it on ?

Thank you.

Alan_M_2

I didn't think a bequeathed property was subject to CGT, that's where inheritance tax comes into play, I may be incorrect can someone be more specific?

However if you decide to sign over your property before you pass away there are time limts that inheritance tax can be retrospectively applied, 5 years from memory. Maybe it was that you were thinking of?

metrobus

The house is only valued at around £230k
so it is below the inheritance tax limit
I think.

I just thought their were rules if he decided to
sell it on.

Debt_Free_Chick

metrobus wrote:

The house is only valued at around £230k
so it is below the inheritance tax limit
I think.

I just thought their were rules if he decided to
sell it on.

The situation is that there is no tax for him to pay on the day the house passes to him. If there were any inheritance tax, then that would be paid from your estate (all the assets you leave) before the house were passed over. The only difficulty here is if there is IHT to pay, but there are no liquid assets (cash) to pay it. Then the house may have to be sold to raise cash to pay the IHT - or he could come to an arrangement to pay the IHT to the executor of your will.

The question then is "what will he do with the house?". If he lives in it, it will become his Primary Principal Residence and there will be no CGT to pay when he sells it.

If, however, he does not live in it, then it will be his investment and there might be CGT to pay when he sells it. There will be some reliefs and exemptions but the bottom line is, if it becomes his investment (and not his home) then there could be CGT to pay.

HTH

Alan_M_2

So in theory you could be left say a £500,000 home, on which you are required to pay inheritance tax, then you decide to sell it and you're then required to pay CGT? That doesn't sound right to me, I think you'll find it's one or the other surely?

Still wouldn't surprise me from the money grubbing !!!!!!s.

Inheritance tax is a outdated prinicpal, that was designed to tax the extremely walthy and redistribute some of that wealth back into society, it's been allowed to erode down to effect the everyday person, it's about time it was removed along with the ridiculous retrospective stamp duty thresholds.

Debt_Free_Chick

Alan_M wrote:

So in theory you could be left say a £500,000 home, on which you are required to pay inheritance tax, then you decide to sell it and you're then required to pay CGT?

That's my understanding. The only way around the CGT is to move into the inherited property as your own home.

That said, if the property were sold immediately it were inherited, the CGT bill could well be "nil" - not least as there is the annual exemption (£8,800 this year, I think).

metrobus

but how long does he need to live in it
for it not be subject to CGT ?

Debt_Free_Chick

metrobus wrote:

but how long does he need to live in it
for it not be subject to CGT ?

There are no hard & fast rules, but the longer the better. Months, not days or weeks.

Is there a potential situation you are trying to deal with?

silvercar

CGT would be based on the difference between the value when it was acquired and the value when sold. there are different allowances available to reduce this. If the property didn't increase in value there would be nothing to pay.

Inheritance tax has already been discussed.

metrobus

silvercar, that sums it up perfectly.

Debt_free_chick, no potential situation just curious
what his position will be,saying that I hope the
dilema will not come up for many years yet :-)

sarah_elton

Just remember the inheritance tax threshold refers to the entire estate, not just property. So house value, plus savings, plus any life insurance payout...