Capital gains tax on parents house?

Chris_l42

I wonder if anyone can point me in the right direct on this - either know the answer or know where I can look it up..

17 years ago my mother died and all of her estate passed to my father. At this point my father enacted a deed of variance on some of my mothers assets. This included a 25% share of their house that was given to me. On the property register I was named as a 'tennant in common'

My father died in 2010 and the house has now been sold and I received 25% of the sale value directly.
The valuation put on the 25% at the time of the deed of variance was £25k. The 25% share of the sale price was £50k.
Is the 25k increase in value subject to capital gains tax?

Thank you for any help
Chris

00ec25

Yes you are liable to CGT, and assuming you have never lived in it so cannot claim any exemptio, your gain is £25k assuming this is effectively the probate value at date of your mother's death/deed of variation.
Was any inheritancne tax paid at date of either mother's or father's death? If not, then the property value has not yet been "proved" - ie accepted by HMRC so you'd be well advised to confirm the basis of the original valuation is documented in case HMRC challenge it..

Assuming it was sold after April 2011 then you have an allowance of £10,600 for the 11/12 tax year and on the basis you have no other gains in 11/12 (and/or no losses) then your net gain would be £14,400

You will pay CGT at either 18% and/or 28% depending on how much of your total taxable income for 11/12 is above the higher rate income tax threshold of £35,000, this is best shown by an example:

Total taxable income = all income subject to income tax plus the net gain less income tax allowance
Eg: gross salary 30,000, net CGT gain £14,400 less tax code (assume 647) allowance ie. £6475
Total taxable income £37,925


Amount of gain at 28% 37,925 – 35,000 = 2,925
Tax payable
(14,400 – 2925 ) @18% = 2,065
plus 2925@28% = 578

Total CGT payable £3,503

Chris_l42

Thanks for the detailed response 00ec25. It was as I suspected. The daft thing is it was done to reduce IHT - none was payable as the estate was under the threshold (after the change which meant unused allowance could be transferred from previously deceased spouse). So if it had been left as part of the estate, no tax would have been payable, but now CGT is.

Thanks again

00ec25

Chris_l42 wrote: »

. The daft thing is it was done to reduce IHT - none was payable as the estate was under the threshold (after the change which meant unused allowance could be transferred from previously deceased spouse). So if it had been left as part of the estate, no tax would have been payable, but now CGT is.

sadly very true - the transfer into other names is a common mistake where people don't understand that avoiding IHT may impact CGT.

Still with the reduction in CGT you are better off than you would have been if CGT rate had stayed at the flat 40%

Mind you, you could be like me , my father died just before the IHT carry over rule came in , I ended up paying £100K IHT which a few months later I would have completely escaped. NOTE - I would rather have my dad than his money.