Capital Gains Tax Query

Noneforit999

This is somewhat of a complicated question so perhaps we would be better off paying for some advice but I figured I would try anyway.

Husbands Gran due to go into care home within the next few months.

House worth approx £350k.

Grandad passed away approx 18 months ago and left half the house split between my my husband and his sister so 25% each. Done via will and changed ownership years ago to tenants in common at 50% each so our understanding is this 50% is protected from the assets.

The question is, how would capital gains tax work.

So if the house needed to be sold, 50% would go to care home fees and my husband would inherit 25% so approx £87500

If the house value has gone up say 10% in that 18 months, would CGT be 10% of his 25% inheritance value? If so his CGT allowance would likely cover most or all of this anyway?

Thanks 

Jeremy535897

Your husband would pay capital gains tax on the difference between his share of the sale price less selling costs, less the probate value of his share at the date of grandfather's death. Assuming no other gains or losses in 2021/22, he could reduce the gain by his annual exemption of £12,300. If any tax were due, it would be payable at 18% or 28% or a combination of the two. See:https://www.gov.uk/capital-gains-tax/rates

If any tax is due, it needs to be reported within 28 days of completion and the tax paid by then:

https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

If his share of thje proceeds exceeds £49,200, he will need to complete a self assessment tax return, whether any tax was payable or not.

Keep_pedalling

If the grandfathers will was done properly his wife would have been given a life interest in his share of the house. If this is the case then there will be no CG liability.

Noneforit999

Jeremy535897 said:

Your husband would pay capital gains tax on the difference between his share of the sale price less selling costs, less the probate value of his share at the date of grandfather's death. Assuming no other gains or losses in 2021/22, he could reduce the gain by his annual exemption of £12,300. If any tax were due, it would be payable at 18% or 28% or a combination of the two. See:https://www.gov.uk/capital-gains-tax/rates

If any tax is due, it needs to be reported within 28 days of completion and the tax paid by then:

https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

If his share of thje proceeds exceeds £49,200, he will need to complete a self assessment tax return, whether any tax was payable or not.

Thanks for your reply, so using rough numbers of £87500 value and £10k of profit over 18 months, even without selling costs etc, it seems unlikely any CGT would be due?

I wasn’t sure if CGT was due on profit from the entire property or merely the amount he would inherit from the sale.

Ta

Jeremy535897

That would seem to be the case. If your grandmother had been given a life interest, as suggested earlier, it would have been more vulnerable to the council seeking assets to pay for care.

Keep_pedalling

Jeremy535897 said:

That would seem to be the case. If your grandmother had been given a life interest, as suggested earlier, it would have been more vulnerable to the council seeking assets to pay for care.

Why would it be more vulnerable? The GM would still only own half the house.

Jeremy535897

Keep_pedalling said:

Jeremy535897 said:

That would seem to be the case. If your grandmother had been given a life interest, as suggested earlier, it would have been more vulnerable to the council seeking assets to pay for care.

Why would it be more vulnerable? The GM would still only own half the house.

I know that the perceived wisdom is that this particular planning works for the deprivation of assets rules, and it presumably does at the point of grandfather's death. Remember though that grandmother has a right to the income of the trust, and once the house is sold to use her half to pay care fees, there will be income arising in the trust that is hers, and that will be taken into account in due course, once her capital falls below the limit.

I should add that I am not convinced that the council cannot treat the value of the life interest trust as an asset in her hands for the purposes of calculating the value of her capital. People can and do sell their life interests in life interest trusts.

Noneforit999

Thanks for the replies.

At the moment, they are awaiting confirmation Gran is definitely going into a home so once that is confirmed, they will start the ball rolling for the house sale.