capital gains tax

HIGHAM_3

hi folks-first post!(hope im in the right forum)

background first-
me and my girlfriend are on about buying a house(first time buyers)and her mother has a property that she received when her father died(i think she actually had the house signed over to her before he died)
anyway my girlfriends sister has been living ther since her grandad died but she will be moving out soon so me and my girlfriend are on about buying it.
the property is worth probably £85000 but her mother wants to sell it to us for £70000.now the house when her mother received it (4 yrs ago)was probably worth £40000-£45000.

my question if any can answer is does her mother have to pay capital gains tax when she sells us the house???

cash99

CGT would be payable on the difference between the current market value(the value you agree with your girlfriends mother is irrelevant) and the market value on the date it was inherited. Less the usual taper relief and annual exemptions.

Worst case is approximately 85-45= 40k less annual exemption 9k = 31k at 40% = £12.4k. The tax rate will depend on you girlfriends mother other income and gains.

maypole

Hello cash99

You seem to know what you are talking about, can you help me? I bought a house in 1996 for £22,000, though at the time, the market value was about £29,000, we got a deal as the house was in an awful state. It might be worth about £140,000 now:j .

It remained empty for 4 years while we renovated:o then let it for 7years to relatives at a reasonable rent, which did not take me above my tax allowance as I am a non taxpayer

If I decide to sell, about how much CGT will I pay? grateful for your help.

PoorDave

Is her mother selling it to you to help you "get on the ladder"?

Why doesn't she just let you live there, and have your family as a whole avoid wasting 10k on unnecessary tax?

I know life isn't just about money, but this seems like a waste to me!

cash99

maypole wrote: »

Hello cash99

You seem to know what you are talking about, can you help me? I bought a house in 1996 for £22,000, though at the time, the market value was about £29,000, we got a deal as the house was in an awful state. It might be worth about £140,000 now:j .

It remained empty for 4 years while we renovated:o then let it for 7years to relatives at a reasonable rent, which did not take me above my tax allowance as I am a non taxpayer

If I decide to sell, about how much CGT will I pay? grateful for your help.

Take a look here

http://forums.moneysavingexpert.com/showthread.html?p=4160058#post4160058

Note the lettings exemption only applies if you lived in the property as your Principal Private Residence.

Capital gains are added too and treated as the top slice of your income. Any part of the gain falling in the lower rate band is taxed at 10%, basic rate band at 20% and higher rate band at 40%.

maypole

Hello Cash99

Thank you for your reply:T

HIGHAM_3

i presume the current market value is gonna be whatever the company we decide to get a mortgage from values it at-is that right?(no estate agents involved)

sorry it was late in coming cash99 but thanks for you previous post!!!:o

HIGHAM_3

cheers jimmo-il have a look into it!:doh: