Do I have to pay tax on a house I inherited?

marina2011

Hi

My Aunt passed away in September 2010 and in her Will she left me her house. This was tranferred to me in May this year. I still live with my parents and unfortunately the house is too far from my work for me to move into. I want to put it on the market in the next few weeks. The solicitors valued it at £150,000 for probate purposes, but I have since carried out improvements to the home and estate agents are valuing it at around £185 - £190,000.

I have never bought or sold a property before, do I need to pay any tax on this, and if so will the tax office contact me directly or do I need to contact them?

The house has been unoccupied since my aunts death, although I have been a regular visitor there.

Also does one have to pay council tax on an empty property? I have been paying it but am not sure if this is correct.

Anyway help provided would be much appreciated, thank you.

McKneff

I've edited my post so as not to cause any confusion. My apologies, I was completely wrong.

timmyt

marina2011 wrote: »

Hi

My Aunt passed away in September 2010 and in her Will she left me her house. This was tranferred to me in May this year did the solicitors know you wanted to sell it, as was possible to substitute the sale value for the probate value to avoid CGT (but you'd need to check if you no longer can once it is vested in your name and I think there is a timelimit). I still live with my parents and unfortunately the house is too far from my work for me to move into. I want to put it on the market in the next few weeks. The solicitors valued it at £150,000 for probate purposes, but I have since carried out improvements to the home and estate agents are valuing it at around £185 - £190,000. improvements are discounted for CGT and you get an annual exemption

I have never bought or sold a property before, do I need to pay any tax on this, and if so will the tax office contact me directly or do I need to contact them?

The house has been unoccupied since my aunts death, although I have been a regular visitor there.

Also does one have to pay council tax on an empty property? I have been paying it but am not sure if this is correct.

Anyway help provided would be much appreciated, thank you.

good luck op

agrinnall

I'm not sure that I agree with McKneff on the tax, I believe you may have to be assessed for CGT on the appreciation from the probate value to the eventual sale price, although with a £10,100 annual allowance you may end up paying little or nothing. I think you'll need to complete a tax return whether you pay anything or not. It's a bit complicated to work out so it may be worth investing a little of your windfall on a visit to an accountant.

CGT information here - http://www.hmrc.gov.uk/cgt/intro/basics.htm

I do agree about the CT exemption, and you may well be able to claim back some of what you've already paid.

Oldernotwiser

McKneff wrote: »

I think you would only pay any tax on the interest you make once it hits your bank account.

Council tax - I think that you exempt for 6 months when its empty but you need to ring the council tax people for clarification.

I believe that the property has to be empty of furniture and impossible to live in to get the exemption. I get the feeling that the OP may have been staying in the property when she visited.

sambuick

I think the best thing for you to do re the council tax is to contact your council. In my experience they are all different and have different policies where empty houses are concerned e.g.: birmingham city council charged us 90% for my nans house after 6 months free whilst it was empty, (they try to discourage empty proerties ) but OH paid nothing for 18 months in the north west.

Re the tax i think you'll only pay on the difference between the sale price and probate value minus your costs i.e. what you've spent on improvements, ea fees, bills etc. You'll then only pay if that sum is more than your CGT allowance for that year but best thing to do is pay to talk to a tax specialist and save any sleepless nights.

RabbitMad

Move into the property and live in it at weekends - lodging at your parents during the week and declare it you principle primary residence. then when you sell it the gain will be CGT free.

However if you sold for £190K you are likely to have £5K EA and Legal fees,
let say you spent £10K on doing it up your gain is only £25K

You get just over a £10K allowance leaving you with tax to pay on £15K. If you are a basic rate tax payer that will be about £3K if you are a higher rate tax payer it will be about £4.5.

Red_dog_Sam

Council Tax Exempt Class F (Deceased persons) applies to a property left empty following someone's death. This exemption can remain in place for up to 6 months after the grant of probate or letters of adminstration - as long as the property remains empty. 6 months after probate the exemption ends and standard empty discount kicks in.
So if probate was granted in May and the property is still empty - there should be no charge yet and you'd be entitled to a refund of what you've paid so far. Send the Council a copy of the letter showing the date probate was granted. At some point in November the exemption will run out though and you will have to pay.
Although an an empty discount can still be awarded, nowadays Council's set their own empty discount rates which can be as low as 10%.