CGT on inherited property

johnfromroundthecorner

Hi, thanks for taking time to take a look.
I inherited a property 10 years ago and on the probate paperwork the property value was declared at a certain value, lets say £100k to make it simple
For the last 10 years the property has been rented out, but I've now had enough of the stress. So if I sell the property for example at £130k, I understand there will be CGT to be paid on the profit since the property was inherited - £30k. But I've read elsewhere that there is an allowance of £12.3k before CGT kicks in, but I can't understand if this is just part of the personal allowance I already get as part of my normal job..
So the question is, is there a £12.3k allowance on the CGT?. If I sell the house at £130k, do I pay CGT on £30k or £17.7K?

Jeremy535897

You have a separate CGT allowance of £12,300 for 2020/21. It is unaffected by your income and personal allowance. It is only used against capital gains. Assuming you have no other gains in 2020/21, you can set it against the profit on the property.

Was there inheritance tax payable on the estate? If not, HMRC may not actually have agreed the probate value, but that is the only figure you can put forward.

Be aware that sales of residential property in the UK where CGT is payable have to be reported to HMRC, and any tax paid, within 30 days of completion of the sale. See:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

johnfromroundthecorner

Thanks for the reply, that's sort of how I understood it but I wanted to be sure by the opinion of somebody else who might actually know what they are talking about :-)
No, no inheritance tax payable at the time, it was well within the limits. The value of the property on the probate paperwork was probably slightly under what it should have been - probably around £10k'ish, but nowhere near bringing into the IHT area. I read the part about the 30 days to pay, just trying to make sure I know how much it is going to be.

oldbikebloke

johnfromroundthecorner said:

Thanks for the reply, that's sort of how I understood it but I wanted to be sure by the opinion of somebody else who might actually know what they are talking about :-)
No, no inheritance tax payable at the time, it was well within the limits. The value of the property on the probate paperwork was probably slightly under what it should have been - probably around £10k'ish, but nowhere near bringing into the IHT area. I read the part about the 30 days to pay, just trying to make sure I know how much it is going to be.

on the basis no IHT was paid, then HMRC have not yet "ascertained" the value of the property at death of death 
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg32222

in plain terms that means when you submit your CGT declaration HMRC have the right to reject the "cost" (ie probate) value you used and substitute their own based upon the assessment of the District Valuer. You can appeal against such an assessment, but that of course involves time and money since it means pitting your professional valuer against the one from their Valuation Office Agency.

Since the property will be sold after 6 April 20 you must now report and pay the CGT within 30 days of the sale. 
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax#:~:text=If%20you%20sold%20your%20property,selling%20property%20in%20the%20UK.&text=If%20you%20sold%20the%20property,next%20Self%20Assessment%20tax%20return.

In a brilliant bit of civil service not thinking it through and amending other things affected by such a change, you will still need to report the sale on your 20/21 tax return (as well as within the 30 day limit) but now because of the 30 day limit, it is practically impossible to use the CG34 form to agree with HMRC whether they accept the value before you commit to a figure in the tax return as they "allow" themselves 3 months to process the CG34 so way outside the 30 day limit.
https://www.gov.uk/government/publications/sav-post-transaction-valuation-checks-for-capital-gains-cg34

bottom line therefore is you may get a shock when they reject your 30 day reported value, but will have plenty of time to then use that figure in your tax return, so at least you won't be penalised by interest charged on unpaid tax for an "incorrect" tax return calculation. That interest may instead be levied on your 30 day value....

Jeremy535897

Valuations, professional or otherwise, can be disputed by HMRC. They don't bother for inheritance tax where it is obvious that no sensible revision to the value will cause a tax liability to arise, but they then reserve the right to challenge it in, for example, a later CGT computation. See the post by oldbikebloke above which gives chapter and verse.

Keep_pedalling

Mickey666 said:

Jeremy535897 said:

Was there inheritance tax payable on the estate? If not, HMRC may not actually have agreed the probate value, but that is the only figure you can put forward.

Surely the probate value is acceptable for tax purposes, otherwise what's the point of getting a professional valuation in the first place?

Very few executors will obtain a professional valuation where estates are well below IHT territory.  

Jeremy535897

If you are that interested, read the manual:
https://www.gov.uk/guidance/shares-and-assets-valuation-manual

oldbikebloke

  Obviously they used the lowest valuation (had to pay for a formal valuation statement) to mimimise the IHT payable and fortunately it wasn't challenged.

as I explained, if IHT was paid, as your case, then at the point HMRC agreed the IHT due they had reviewed and agreed the valuation. 
I appreciate you had a wide range of values, but the fact remains HMRC ascertained the value as part of the IHT calculation and decided to accept it rather than challenge it. 

csgohan4

Just double checking, if one relative dies and they give you 50% of the house with the 50% remaining to the surviving partner, would it best to get a RICS valuation on death and again when the other relative dies as you have not lived in it and only sell once both relatives have passed to tick all the boxes for correct CGT calculations, as valuations by EA's are not professional