Very confused...inheritance tax, CGT, income tax

G_M

shavy65 wrote: »

Thanks for reply Innys. I would def need to sell the house straight away then to pay back the CGT.

Did you not read the earlier posts?

The CGT liability does not arise until you sell. If you don't sell, there is no CGT to pay, as you have made no 'gain'.

Innys1

shavy65 wrote: »

Thanks for reply Innys. I would def need to sell the house straight away then to pay back the CGT.
So aswell as the £20k and the CGT we don`t think I`d have to pay anything on potential earnings I could have been making from any rent (at rental market value) from the previous 8 years, as stated earlier?(even though she`s obviously been living there rent free?) If this was the case that would significantly increase the amount I`m due the Taxman.


Maybe I should mention, I`m in Scotland, I know sometimes there are discrepancies within UK!

The CGT doesn't become due until you sell the house. If you have no need to sell it, why would you?

No, you don't have any tax to pay on potential earnings, provided the house was worth less than the IHT threshold on your granny's passing away.

G_M

shavy65 wrote: »

But it was transferred to me 8 years ago...I don`t recall declaring it`s value to the solicitor back then.

You may well not have. You did not (legally) need to. though it would have been sensble to get it valued at the time.

You could go onto Rightmove or any number of other website (google "sold property prices") and put in the postcode. Then look for local properties that sold 8 years ago, check if they are similar (eg 2 bed, 3 bed whatever) and look at the sold price.

Mrs_pbradley936

shavy65 wrote: »

I own 7 year old house of my own for my family of 4, it`s not like I needed anything from anyone. The house was being left to me anyway as per their request, they just thought it would be wise to move it to me back then. the plan was to keep it in the family (meaning I personally wouldn`t make anything from it) but as it transpires I`d need to sell it to pay any CGT I`d owe.

Would you consider moving into it when granny goes to heaven. Then you could sell your own place and not pay anything. You are only allowed one home/primary residence. You need not stay there forever but if it is too far for kids schools, your work or whatever then you just have to pay the tax.

Kynthia

Mrs_pbradley936 wrote: »

Would you consider moving into it when granny goes to heaven. Then you could sell your own place and not pay anything. You are only allowed one home/primary residence. You need not stay there forever but if it is too far for kids schools, your work or whatever then you just have to pay the tax.

The property would still be liable for CGT for the years it wasn't the owner's principle primary residence. Living there only exempts the time the owner lives there and the last 18 months of ownership, unless there are any other reliefs that can be claimed.

booksurr

to recap:
- no sale = CGT not yet payable
- when sold you will be taxed at 18 and/or 28% (depends on numbers at the time) on the gain between its value at date of transfer ("original cost")and the price you get when you sell. It would have been better to get a proper valuation to support that original cost as HMRC will always refer them to the VOA for every CGT calculation. If the VAO disagree with your figure then HMRC will use the VOA's, you can appeal but that would be horrendously expensive in terms of professional fees as it would have to go to a VAO tribunal (ie like a court case). You are allowed to ask HMRC before you submit your CGT calculation, but only after you have sold it, not before, whether your cost is "acceptable" so it won't come as a shock at a later date - you do that using Form CG 34 https://www.gov.uk/government/publications/sav-post-transaction-valuation-checks-for-capital-gains-cg34

your grannie remains exposed to IHT as the undervalue is without doubt a gift with reservation so that amount stays in her estate. You say her estate is below the IHT threshold so that is academic

you are not liable for any tax on the money you paid to grannie

grannie is exposed to deprivation of capital if she needs to claim means tested benefits in the future

reference to paying tax on notional income is correct in very very specific circumstances, they do not apply here, you can ignore that thought

shavy65

Great info booksurr, very informative. To all - Thanks for taking the time to reply, been most helpful and has alleviated some of my fears!


Cheers.