Cgtax

woody_56

Hi having been a tax payer all my life and still paying it on my pensions I have a question on CGTAX and reducing liability.?

I own my present house.

But have two houses willed to my wife and I.
Would I be better to get my Father and my Wife's Mother
to will both properties to our two children to avoid CGT liability.

Thanks Jim.:cool:

CLAPTON

There is no capital gains tax resulting from death : only inheritance tax depending upon the value of their estate

holly_hobby

CGT exposure relates to a gain on disposal of an asset (your primary home is excluded from this).

So as Clapton states, you won't have any CGT liability upon inheritance of either property, but there may be IHT duties if the decds net estate exceeds available nil rate band threshold.

Hope this helps

Holly

woody_56

Hi thanks for your replies I was under the impression you paid
full capital gains tax when you sold a second property.?:cool:

nomunnofun

woody_56 wrote: »

Hi thanks for your replies I was under the impression you paid
full capital gains tax when you sold a second property.?:cool:

Yes but this is the first time that you have mentioned selling any property.

If you were to sell the property which is left to you, you will pay capital gains tax on the amount that you receive LESS the value at inheritance. Even then you can deduct selling costs. After that, the first £10900 of profit is tax free.

The HMRC site, rather unhelpfully, still has 2010/11 and 2011/12 rates showing.

http://www.hmrc.gov.uk/rates/cgt.htm#1

CLAPTON

woody_56 wrote: »

Hi thanks for your replies I was under the impression you paid
full capital gains tax when you sold a second property.?:cool:

if you sold a second property then yes you are liable to pay cgt.

You pay the tax, after allowances on the PROFIT.

In the case of properties' inherited, the profit is the difference between the sale price and the acquisition price which would be the probate value.

So if you sell after probate there would usually be no gain so no tax.

00ec25

your question appears aimed more at inheritance planning than CGT per se and so a better understanding of your motives is required

are you confident that you will never need the money from selling either property?
If no then you cannot avoid CGT as it will be you selling your inherited property

If yes then
a) how old are your children?
b) what would they do with the property when they inherit it?

If your children are <18 they they cannot legally own the property, instead it would have to be held in trust until they come of age at which point the trust is wound up and either they sell it and pay CGT at that time in their own names or they keep it on for sale at a future date (presumably because they actively want to become landlords???)

If your children are already >18 then either they sell at time of inheritance, on that basis CGT would be irrelevant as the sale would be part of the settlement and distribution of grandparents estate and may be subject to IHT if estate > IHT threshold or, if not subject to IHT, then no tax is due at all if the sale is made as part of the estate and the sales price = the probate value so no CGT taxable gain has been made

if they decide to keep the property on and sell up later then obviously they would the ones liable to CGT at the time of sale with their exposure to CGT being sales price less probate value = taxable gain, as they would be the owners and the money would be theirs not yours. So in that sense yes you and your wife have avoided CGT liability by simply skipping a generation as the asset went direct to your children, but that is part of basic tax efficient inheritance planning

holly_hobby

woody_56 wrote: »

Hi thanks for your replies I was under the impression you paid
full capital gains tax when you sold a second property.?:cool:

Hi,

Yes .. I did say in my orig response ...

"CGT exposure relates to a gain on disposal of an asset (your primary home is excluded from this)."

But only briefly mentioned for info, given that your original post mentioned nothing about inheritance and subsequent disposal.

OOec25 has however helpfully provided relevant info re this aspect, which should get the ball rolling ....

Holly x

John_Pierpoint

If you are now more confused, try investing in the "Which?" giving and inheriting guide.
http://www.amazon.co.uk/gp/product/1844901181/ref=s9_simh_gw_p14_d14_i1?pf_rd_m=A3P5ROKL5A1OLE&pf_rd_s=center-2&pf_rd_r=1HTYYVZG0RX0WAPQAS4W&pf_rd_t=101&pf_rd_p=358549767&pf_rd_i=468294