inherited property and stamp duty

NationalElfService

Hi all,

I was recently lucky enough to have inherited a property that my parents had rented out to a lovely family in Hampshire (which I continue to rent out to the same family). My partner and I still rent in Oxford and we've been trying desperately to save up fro a deposit to buy our own house to live in.

Now that I own a house I was wondering if anyone knew if I had to pay the extended stamp duty since we'd be pruchasing our main residence?

If so the extended stamp duty would put a serious dampner on what we could afford (or even make it unaffordable entirely).

Any advice would be greatly appreciated.

NationalElfService

Surrey_EA

NationalElfService wrote: »

Now that I own a house I was wondering if anyone knew if I had to pay the extended stamp duty since we'd be pruchasing our main residence?

Yes you do, as you will be going from owning one property to two:

AnotherJoe

Yes, you would.

Sell it, use the money to need a smaller mortgage / get a bigger house / in better area / obtain a better mortgage rate.

Why are even contemplating keeping it? The "profit" you presumably think its making needs to be traded off against the cost of a larger mortgage at a higher rate whilst living in a smaller house in a worse area.

And if you are struggling to save a deposit how would you expect to afford repairs on two houses. Not to mention the hassle and legal requirements of being a landlord.

Tough luck for the "lovely family" but you need to look after your also presumably lovely family first.

NationalElfService

Good points thank you! My main concern was paying capital gains tax and/or inheritance tax (should the worst happen).

P.S They really are a very lovely family though, if I can help it I'd like to ensure they stay where they are.

00ec25

NationalElfService wrote: »

Good points thank you! My main concern was paying capital gains tax and/or inheritance tax (should the worst happen).

P.S They really are a very lovely family though, if I can help it I'd like to ensure they stay where they are.

you do not pay inheritance tax. The estate of person who died does, if, and only if, the estate's value is above the IHT threshold. Since you have already inherited the property then the IHT position must have already been dealt with or else the executors got something very wrong

as an owner of a property which is not your main home you absolutely will be liable to CGT. How much you actually have to pay will depend on the details of the calculation of course.

and as already mentioned, yes you are liable to pay the higher rate SDLT because it appears you are the sole inheritor the the property so you own more than 50% of it. Properties inherited within 3 years of you buying somewhere are ignored if, but only if, the inheritor owns 50% of less. You own 100% so that dispensation does not apply.

silvercar

as an owner of a property which is not your main home you absolutely will be liable to CGT. How much you actually have to pay will depend on the details of the calculation of course.

The starting point for the CGT calculation will be its probate value.

AnotherJoe

Well you'll certainly have to pay CGT when you sell it.
Plus other taxes as a landlord with income.
Are you complying with all the laws regarding being a LL?
Have you had to fill your first tax return in yet as a LL?
If you are a high rate tax payer you may find all sorts of gotchas arising with regard to income. Or you may find you become a HRT just because of the new income.

Inheritance tax would/should have been dealt with at the point of probate.

Cheeky_Monkey

NationalElfService wrote: »

If so the extended stamp duty would put a serious dampner on what we could afford (or even make it unaffordable entirely)

So basically, you are putting the 'lovely family' before yourself and your partner - how very noble

Mojisola

NationalElfService wrote: »

They really are a very lovely family though, if I can help it I'd like to ensure they stay where they are.

Would they be able to buy it - a direct sale would save you money so you could knock that off the sale price.

G_M

* inhertance tax - this should have been paid by the executors before probate was granted and the property transferred to you

* Capital Gains Tax - it's not your main residence so yes you'll be liable when you sell. Any increase between the probate value when you inherited and the eventual sale price

* additional SDLT. If you keep it and buy a 2nd property to live in you'l have to pay the additional SDLT

* income tax. You should be paying this on the rental income

NationalElfService

Sorry I think I phrased things confusingly.

I was gifted a property, that is subject to the 7 year rule. So IHT may be subject, if my parents pass away in that period (shudder).