inherited house ?

Bossyboots

Debt_Free_Chick wrote:

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).

I thought you had a two year window from grant of probate in which to sell an inherited property before CGT was payable. I can't remember now where I read that though.

BobProperty

Bossyboots wrote:

I thought you had a two year window from grant of probate in which to sell an inherited property before CGT was payable. I can't remember now where I read that though.

I would suspect you have 2 years to sell it and pay the IHT before the revenue get really stroppy about not having their money. IMHO.
I will try to clear something up (and please any tax experts correct me)
While you are alive you pay tax and are eligible for tax relief and tax allowances.
When you die, you cease being eligible to pay tax or get tax relief. (Hence the HHGTTG joke about "taking a year off dead for tax purposes".)
When you die, your assets and liabilities become your "estate". Your estate is liable to certain taxes. Including IHT.
Having settled your estate, property (in this example) transfers to other persons at a defined value (probate?).
If someone who inherits such a property then disposes of it they would be subject to CGT as per the prevailing rules.

silvercar

BobProperty wrote:

While you are alive you pay tax and are eligible for tax relief and tax allowances.
When you die, you cease being eligible to pay tax or get tax relief. (Hence the HHGTTG joke about "taking a year off dead for tax purposes".)
When you die, your assets and liabilities become your "estate". Your estate is liable to certain taxes. Including IHT.
Having settled your estate, property (in this example) transfers to other persons at a defined value (probate?).
If someone who inherits such a property then disposes of it they would be subject to CGT as per the prevailing rules.

I agree with you.

HugoSP

So, Alan, your £500,000 house would be included in an estate that is subject to IHT above the current threashold/allowance at 40%.

However if the owner (OP) gave/sold it to his/her son and paid him rent wilst he/she was living there, or met some other HMRC requirement, then, provided he/she outlived the gift for 7 years or more then the house would be excluded from the estate for IHT purposes - therefore no IHT would be payable. If the death occurred within the 7 year window then IHT would be payable on a sliding scale from 100% up to the end of year 2 to about 20%?? up to (but not including) the end of year 7.

CGT is different. This is the value between his investment when he aquired it (on this occasion via inheritance, so his investment would be included in his share of his inheritance) and the final sale price.

Yes you have an annual allowance of some £8,800 per year but you cannot allocate all the years allowances together in the time you've had the house. You use your prevailing year's CGT allowance to offset against the gain from the sale of the property. So if you make £100k over 5 years you can only offset the current years allowance against the profit you've made - not the last 5.

However there is also something called taper relief that can also be claimed. This comes into effect when the property has been owned for a number of years, so quick turnaround investments won't attract this.

Remember that other stuff can be offset against CGT. This may include the cost of improvements and sale/purchase/legal fees etc.

If the property is to be the principle residence of the son, then no CGT would normally be payable. The only exception to this rule is if the son sells it on quickly and HMRC believe he is actually generating an income from property investment. If he sells it on quickly for other reasons, eg move to a new job, change of scene etc then I guess HMRC would not be too bothered.

HMRC do this to catch people who make a living by renovating property whilst they live in it and selling it on.