Capital Gains Tax

Miss_Poohs

I am currently renting out my parents house - but I suppose the time will come eventually when I'll want to sell it.

I believe if I sell the property 2yrs after my dads death I'll be liable to pay CGT - but how do I do this ?

Do I declare it to the solicitor or do I contact the tax office directly, how do I actually tell them Ive sold the house, and how is the tax paid?

Thank you

Miss P

G_M

You tell them. If you don't and they come chasing, there'll be a fine on top. And yes, they DO look at Land Registry sales and see when people have more than one property.......

Details here.

I assume the property is not really your "parents' house" but is actually (now) yours? Otherwise you must be acting as your parents' agent? For which you have authority? EPOA?

I assume also you are complying with all the other rental requirements.

theartfullodger

You should take steps to establish the market value of the place when it came into your possession : a probate valuation may give an unwelcome low number. (CGT being payable on the increase in value - with other considerations, but the basic increase you want as low as possible)

Miss_Poohs

GM - yes the house is now mine - in my soul name, its rented out through a letting agent and yes all gas and leckie safety checks have been done. I also have landlord insurance with a generous liability cover, and I have registered as a landlord with our local council. There is no mortgage on the property so no need to inform any lender.
I see this renting situation being more for the long term ie in excess of 5 yrs.
It was the house I grew up in and havent ruled selling my own home and moving back into my old family home at some point in the future.

Artful - when my sister and I were looking to agree a price I had a local estate agent give me a written valuation which the solicitor dealing with the estate used to work out how much I should pay my sister for her share.

Im assuming this is all acceptable and that it will be valuation will be used as a reference point in the future should I require to pay CGT?

Miss P

clutton_2

THE VALUATION of the property (as far as the tax man is concerned) is the value at the time that you START your buy to let business... ie the time you start to rent it out. Which is why you want the probate value as high as you can - to minimise your ultimate capital gains liability when it comes to selling it. You have a duty to inform the HMRC that you have started a business within 3 months of starting. They run free courses for the newly self employed which are very helpful. Search on their website for Taxation of Rents to check out all the allowances you can claim against tax.

You have a CGT allowance this year of £10,800 so any gain under £10,800 would not incur any tax liability. The allowance goes up each year.

If you move into it before selling it, and it then becomes your Principal Private Residence this may reduce your CGT liability on sale. You really need to talk to a property accountant.

GDB2222

Clutton, is renting out a house a business for that purpose?

The base cost for CGT purposes is the probate value. That's your acquisition cost**. If you have not lived in it as your principal private residence, it does not matter what the value was on the day you first let it out.

**Strictly, your acquisition cost is half the probate value (which was your inheritance) plus the money you paid your sister for her half-share. If you paid her half the probate value, then it's as broad as it is long.

clutton_2

Sorry GDB - i disagree - i was in a similar position, and my excellent property specialist accountant has used the value of the asset as the value on the day the BTL business started..... if its not let out, its not a business ... not the value on the date i aquired the asset.

if these two dates are very close together i may be hair-splitting "!

GDB2222

What has your accountant used this value for, and what was the property used for before BTL, and how did you acquire it?

The point with the OP is that she pays CGT on the whole increase in value since acquisition, regardless of whether it was empty or let. Maybe your position was different in some way.