Capital gains tax / property 2 August 2022 at 6:57PM in Cutting tax 8 replies 276 views

NannaH

My in laws bought a new home a year ago that they recently moved in to,  they still own their original house and plan to sell,  it needs quite a bit of renovation and will take them a good while as they both work. 

Will they be liable for CGT when they do sell it?   

They lived there for over 30 years and it will probably sell for around £120k depending on how much they spend putting it right.    They haven’t considered CGT and didn’t even know that they can reclaim the extra SDLT on the new house if they sell the old one within 3 years. 

Keep_pedalling

They will have 30 years of private residence relief to offset any gains so it is unlikely they would face CGT. The big risk is they spend a lot of money renovating the place and not get a return on the expenditure. They will also be facing the expense of maintaining the empty house including council tax.

In their shoes I would sell as it is.

NannaH

Only a developer would buy for peanuts it in it’s current state,  it’s a damp mid terrace that hasn’t been decorated or had new carpets in over 20 years,  the bathroom looks like it hasn’t been touched in a hundred years and not in a good ‘period’ way. 

Mr.Generous

NannaH said:

Only a developer would buy for peanuts it in it’s current state,  it’s a damp mid terrace that hasn’t been decorated or had new carpets in over 20 years,  the bathroom looks like it hasn’t been touched in a hundred years and not in a good ‘period’ way. 

It's going to need a full renovation - doing it yourself you'd probably make in the region of £30 - 40k, if you're paying labour take a huge chunk off that.

Jeremy535897

Capital gains tax is irrelevant. If they lived in the property for 30 years and don't live in it for 3 years, only 1/11th of the gain at most would be chargeable, and even if the property cost nothing, 1/11th of £120,000 is less than one annual exemption of £12,300.

Unless there are structural issues it could probably be renovated for £10,000 or so, and that would make it much more saleable, but the finish needs to be professional.

p00hsticks

NannaH said:

Only a developer would buy for peanuts it in it’s current state,  it’s a damp mid terrace that hasn’t been decorated or had new carpets in over 20 years,  the bathroom looks like it hasn’t been touched in a hundred years and not in a good ‘period’ way. 

Don;t underestimate what people are prepared to take on or how much it'll cost (in time and money) to do up.

They run the risk of spending more than they'll ever see in any increase in value.

I'd strongly suggest to them that at the very least they get one or two estate agents in to see what they say and ask what improvements they suggest to make it more saleable.

If they've not decorated in twenty years one has to wonder how good a job they'd make of it now....

NannaH

Well they never finished any kind of DiY job in their old house,  that’s why it’s in such a state, plus years of hoarding.  

That’s why I’m amazed that they’ve actually spent a huge amount renovating the new place,  New windows and doors, full rewire, replastering,  complete dig out of downstairs floors and new concrete ones put in,  professionally decorated and carpeted throughout etc.  
I imagine they’ll just try and make the old place look habitable by stripping off the old peeling wallpaper and repainting,  it’s in  a fairly sought after area for some weird reason,  even though it’s on a very steep hill and parking is a nightmare,  the steps up to the front door will put older buyers off,  their parents stopped visiting because of it. 

Having cleared, cleaned and decorated a cluttered and dated inherited house ready to sell, I know what’s facing them,  I won’t be surprised if it hasn’t been done 3 years from now,  they will have to pay double Council tax on it in a few months time plus if they don’t keep it heated, the damp will get even worse. 

Jeremy535897

p00hsticks said:

NannaH said:

Only a developer would buy for peanuts it in it’s current state,  it’s a damp mid terrace that hasn’t been decorated or had new carpets in over 20 years,  the bathroom looks like it hasn’t been touched in a hundred years and not in a good ‘period’ way. 

Don;t underestimate what people are prepared to take on or how much it'll cost (in time and money) to do up.

They run the risk of spending more than they'll ever see in any increase in value.

I'd strongly suggest to them that at the very least they get one or two estate agents in to see what they say and ask what improvements they suggest to make it more saleable.

If they've not decorated in twenty years one has to wonder how good a job they'd make of it now....

A lot of people who claim to have made money from doing up property have made money because of house price increases over the time held, rather than because of the improvements carried out. However, the improvements may also make the property easier to sell.

An estate agent will always say sell rather than do up, in the hope of getting the job to sell the property.

Albermarle

I'd strongly suggest to them that at the very least they get one or two estate agents in to see what they say and ask what improvements they suggest to make it more saleable.

I would agree with this, but take into account when assessing their opinions, this -

An estate agent will always say sell rather than do up, in the hope of getting the job to sell the property.