CGT and Inheritance Tax on property

Biggidy

Hi Booksur,

My mother died intestate also.

My mother jointly owned the house with my father, she died exactly 20 years ago. We had the house valued retrospectively at £80k in 1994, the threshold for IHT in 1994 was £150k so we should be ok regarding the thresholds as the solicitor has confirmed my mother was still on the deeds up until my fathers death.

Biggidy

Hi Zygurat789

I have seen how the older generation have been affected by their pensions and can only ponder what will happen to mine in 35/40 years.


The government has a trick of watering down pensions with inflation, I would much rather buy a property and live off the rental in my old age.

Biggidy

booksurr wrote: »

LOL - that is why HMRC ascertain the value by referring the matter to the official valuer (the VOA - Valuation Office Agency) for a definitive figure and if the VOA do not agree with yours then tough, HMRC use the VOA figure and have the final say

We had several valuations from estate agents and the solicitor took the average value for our application.


Obviously we could influence the estate agents slightly in their valuation, but if to high and we didn't achieve the joint thresholds of 325k for my mother and father we would pay more IHT. To low and we could pay more CGT.


It's a guessing game, but IHT is higher than CGT, so we went for a lower valuation.

zagfles

zygurat789 wrote: »

Not even if HMRC pay two thirds of what you do into it?

How do you work that out? The max the OP could put into his pension is his earned income ie £31k, he'd get basic rate relief on that plus 10% less CGT on the amount as it'd give him more basic rate band to use against the GCT, so 30% tax relief total. So HMRC would pay less than half what the OP pays into it. Or have I missed something?

zagfles

Biggidy wrote: »

Hi Zygurat789

I have seen how the older generation have been affected by their pensions and can only ponder what will happen to mine in 35/40 years.


The government has a trick of watering down pensions with inflation,

You realise you can invest in almost what you want in a pension (except residential property!) Everything you invest in is watered down by inflation.

I would much rather buy a property and live off the rental in my old age.

So why not keep the house with your sister, or buy her out, then you won't have to worry about GCT as you won't be selling it.

zagfles

booksurr wrote: »

You can sell as the personal representative of your father's estate rather than selling as an owner and thus avoid having to transfer the house into your and your sister's name, but half of the money is hers and hers alone.

Plus doing that would mean the whole gain is taxed at 28% rather then getting some at 18%. Also AIUI only one GCT allowance could be used (but not sure on this point).

Biggidy

zagfles wrote: »

You realise you can invest in almost what you want in a pension (except residential property!) Everything you invest in is watered down by inflation. So why not keep the house with your sister, or buy her out, then you won't have to worry about GCT as you won't be selling it.

I do not fancy a Buy to Let property with a mortgage at around £400k. I could buy a decent flat outright or have a small mortgage on a decent house.
Keeping it with my Sister is not an option as she needs the money.

jimmo

What happened to the £60k mortgage?
Has it been paid off?
If so, how?
Will it be paid off from the proceeds of sale of the house?

Biggidy

jimmo wrote: »

What happened to the £60k mortgage?
Has it been paid off?
If so, how?
Will it be paid off from the proceeds of sale of the house?

Good question.

The 60k remortgage was given by my father to my sister as a deposit to buy her house just before he died. She was paying him back alongside her own mortgage.

Obviously my sister will be paying this back out of her own half of the inheritance and I assume she will have to pay tax on this also.

jimmo

Now I’m really confused.
Just to be clear did your father lend your sister £60k?
Did he borrow that money using his house as security for his borrowing or did he take it from his savings?