CGT On prospective sale of second property

fcandmp

Hi I would much appreciate help with the following situation. My cousin is thinking of selling a second property which will become vacant after current tenants leave in January 2022. The property was originally purchased jointly with her husband for £125k some 20 years ago, and she is now the sole owner since his passing in 2020. The current estimated value of the property is £250k and I wonder what her capital gains tax exposure is likely to be upon sale. Many thanks for your help.

Jeremy535897

The gain is calculated as follows.
The half she originally owned:
Sale price say £250,000 less selling costs say £2,000 less acquisition costs say £1,000 less purchase price £125,000 = £122,000 /2 = £61,000
The half she inherited:
Sale price say £250,000 less selling costs say £2,000 less market value on husband's death say £220,000 = £28,000 /2 =£14,000
Total gain £75,000, assuming it was never her main residence and there were no allowable improvements.
If she has no other gains or losses in the tax year, or losses brought forward, she pays tax on £75,000 - £12,300 = £62,700 at 18%, 28% or a mixture of the two, depending on her income. The gain must be reported and the tax paid within 60 days of completion:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

The correct figures need substituting for my guesstimates.

fcandmp

That is really helpful many thanks. What sort of records will she need to support things like acquisition costs, or allowed improvements?

Jeremy535897

In the unlikely event HMRC asks, a completion statement for the cost and a bill for the improvements.

Grumpy_chap

Jeremy535897 said:

The gain is calculated as follows.
The half she originally owned:
Sale price say £250,000 less selling costs say £2,000 less acquisition costs say £1,000 less purchase price £125,000 = £122,000 /2 = £61,000
The half she inherited:
Sale price say £250,000 less selling costs say £2,000 less market value on husband's death say £220,000 = £28,000 /2 =£14,000
Total gain £75,000, assuming it was never her main residence and there were no allowable improvements.
If she has no other gains or losses in the tax year, or losses brought forward, she pays tax on £75,000 - £12,300 = £62,700 at 18%, 28% or a mixture of the two, depending on her income. The gain must be reported and the tax paid within 60 days of completion:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

The correct figures need substituting for my guesstimates.

Genuine question.

Would the husband's estate have been liable for CGT on the 50% of the gain up until death?  Presumably tax to have been settled before the distribution of the estate.  Except there are specific rules about transfers between spouses.

Jeremy535897

No, because there is a capital gains tax free uplift on death, even where the surviving spouse exemption prevents any inheritance tax charge.

Grumpy_chap

Jeremy535897 said:

No, because there is a capital gains tax free uplift on death, even where the surviving spouse exemption prevents any inheritance tax charge.

Many thanks, Jeremy. 👍