Capital Gains Tax

Theonell

We have just inherited a property which we can not decide to sell or rent and therefore it would be a second residence not our main residence. We are unsure what value we would have to pay capital tax on. For example if the property is worth £260,000 now and we sold it would we pay CGT on the full value minus allowances. If we rented the property say for 3 year and the value increased to £280,000 would we then pay CGT on £280,000 or £20,000 

Jeremy535897

Your capital gains tax base cost is the value of the property at the date of death of the person you inherited it from. Presumably a value was put in for probate purposes? If so, use that figure. If HMRC agreed the probate value for inheritance tax purposes, they cannot argue it on a later sale.

If the £260,000 figure you quote is the value at the date of death (not the value now), then if you sold it for £280,000, the capital gain would be £20,000, shared between you according to your ownership (I am assuming the reference to "we" means more than one person inherited it). Each individual has an annual capital gains tax exemption of £12,300.

Theonell

Jeremy535897 said:

Your capital gains tax base cost is the value of the property at the date of death of the person you inherited it from. Presumably a value was put in for probate purposes? If so, use that figure. If HMRC agreed the probate value for inheritance tax purposes, they cannot argue it on a later sale.

If the £260,000 figure you quote is the value at the date of death (not the value now), then if you sold it for £280,000, the capital gain would be £20,000, shared between you according to your ownership (I am assuming the reference to "we" means more than one person inherited it). Each individual has an annual capital gains tax exemption of £12,300.

Thanks for your response so its any profit from the property valued at the date of death which would subject to CGT and not the full amount of the property valued at date of death even though that would be a capital gain. 

[Deleted User]

Theonell said:

Jeremy535897 said:

Your capital gains tax base cost is the value of the property at the date of death of the person you inherited it from. Presumably a value was put in for probate purposes? If so, use that figure. If HMRC agreed the probate value for inheritance tax purposes, they cannot argue it on a later sale.

If the £260,000 figure you quote is the value at the date of death (not the value now), then if you sold it for £280,000, the capital gain would be £20,000, shared between you according to your ownership (I am assuming the reference to "we" means more than one person inherited it). Each individual has an annual capital gains tax exemption of £12,300.

Thanks for your response so its any profit from the property valued at the date of death which would subject to CGT and not the full amount of the property valued at date of death even though that would be a capital gain. 

More or less. The ‘purchase price’ for each, using Jeremy’s example, would be £130000. The sale price for each would be £140000 and the gain for each, therefore, £10000. Selling costs can also be deducted but, on that example, no tax to pay.

Each will have to include the sale on your Self Assessment returns though. If happening now, the return would be for 2021/22 tax year, deadline for submission 31st January 2023.