CGT

Elemental_Wish

My mum passed in April and I dealt with the probate which was very simple as everything was left to my dad. My dad has now passed away leaving everything to my brother and I including their house. We thought that we would get a house valuation from a surveyor (due to my distrust of estate agents to do their job properly) and when the dust settles to do a full renovation of the house before selling it. However, some of the posts on the forum it suggests that the estate, or my brother and I may fall foul of CGT if we increase the property's valued we would need to take this into consideration when working out whether it's worth renovating the house.

Where is the best source of information for calculating GCT? Even after renovation the estate won't be near the £1m IHT threshold.

Elemental_Wish

I have just read on the government website that CGT isn't due if the property is your main residence. If my brother or I were to move in during the renovations until it sold, would this avoid the tax?

Keep_pedalling

It is very rarely worth putting money into renovating before selling and you will not be able to deduct renovation costs from any gains you might make. 

p00hsticks

Elemental_Wish said:

I have just read on the government website that CGT isn't due if the property is your main residence. If my brother or I were to move in during the renovations until it sold, would this avoid the tax?

You can only have one main residence (and if married, a couple can only have one main residence between them). So if you or your brother already own a home of your own and move from it into this one, you'll simply be creating a potential CGT liability on your existing home instead. You'd also have to satisfy HMRC that it really was your main residence for some time, and you weren't just staying there for a month or two to supervise renovations. There's no hard and fast rule on how long you'd need to stop or what HMRC would accept, but it would probably involve things like getting on the electoral register, changing your address with DVLA, HMRC, bank accounts etc.

As keep_pedalling says, from a financial point of view, assuming that the property is mortgageable,  you would almost certainly be better off selling it in the state it is now as a 'doer upper' and let a potential purchaser do it up as they, not you and your brother, think best. It'd also be by far the simplest option.

Having said all that, to answer your actual question , there is a CGT calculator on the government website here

https://www.gov.uk/tax-sell-property/work-out-your-gain

I believe that in the case of inherited property the acquisition price would be the value put down for probate.

Elemental_Wish

Keep_pedalling & p00hsticks - Thanks for your replies. 

You'll have to excuse my ignorance on house renovations but are you saying that I won't get a return on investment renovating the house? Is that due to GCT or that renovations don't generally generate a financial return? 

My brother and I are both currently renting so for one of us to move in for a year while the renovations happen isn't an issue.

JGB1955

Yes, renovations don't generally generate a financial return...  your dream kitchen might well see me saying 'well, that's the first thing that's going to have to come out..'

Brie

isn't there something about needing to live in a place X long - or am I thinking of rules from a different country?

as for renovations.....you're idea of a lovely kitchen might not be what the buyer wants and they'll just rip it out.  nothing the matter (in my opinion) with doing really basic stuff like removing old stained carpets and sanding the floors a bit, or a layer of magnolia paint to cover up the grubby walls.  That's just dressing the house for sale really.  But do you want to be living there while it's going on??  

Also (as I have a friend who has this issue..) what if you move in and decide to stay for the next 10 years.  Not paying rent.  Might get your bro a bit cranky.

Brie

And are there any rules about how quickly the estate needs to sell a property?

Also Elemental - sorry for your losses.  That's a lot to deal with in a short period of time.

Elemental_Wish

The question I was ultimately looking for the answer to in my original post was whether to sell the house as is, carry out a minor refurb by way of deforesting the garden, carpets and decorating or do a full renovation including replacing the central heating, windows, artex etc. From the answers so far I guess it will be to just make it presentable for sale.

Mojisola

Elemental_Wish said:

The question I was ultimately looking for the answer to in my original post was whether to sell the house as is, carry out a minor refurb by way of deforesting the garden, carpets and decorating or do a full renovation including replacing the central heating, windows, artex etc. From the answers so far I guess it will be to just make it presentable for sale.

And make it clear in the adverts that it is priced accordingly to stop potential buyers trying to knock the price down because the work needed.

BooJewels

Keep_pedalling said:

It is very rarely worth putting money into renovating before selling and you will not be able to deduct renovation costs from any gains you might make. 

That's not strictly true - you can't deduct minor things like painting and cleaning - anything that would be considered maintenance - but can claim for major building improvements, like extensions, new kitchen etc.  https://www.gov.uk/tax-sell-home/work-out-your-gain

I would also endorse the idea of not doing the work and saving yourself the aggro.  Just sell it in an honest state, marketed as such.  I took advice from various sources when in the same position and am glad that I took that approach.  The buyer is in the trade, but buying it for his own family - his second visit to the house was with his architect and they commented that they were glad we hadn't tried covering things. Many of the internal walls are currently in a skip in the drive - so not much point in us wasting time and effort painting them.

The gain you potentially have to pay tax on, is any increase in value between the value put on the Probate form (which should be the value at the date of death - your father's,  not the earlier one of your Mum) and what it eventually sells for.  We ended up making a gain because we had to delay everything due to Covid and the stamp duty stuff sending the housing market daft.

Sorry for your losses.