CGT on renting inherited property

mantra1

Hello

I recently inherited a house from my poor late dad

I decided to keep the house and I have spent about 65k refurbishing the entire house.

My plan is to rent out the property. I live abroad, however. I have no other houses in the UK

However, I was recently reading about possible future CGT. I've just been reading online but am confused 

1. As I am renting it out, if I sell the house in the future, do I need to pay CGT on the house?

2. I spent my own money on the house myself and it's obviously worth more now, so does this count as "making a gain" (as the house is worth about 65k more than when valued during probate)

Thank you

[Deleted User]

1 - Yes! Nothing more to say!

2. When you come to sell the gain will be - sale proceeds less value at probate less cost of improvements (generally those items which cannot be simply classed as replacement items or basic repairs which would be set against rental profits). Currently you would be able you tildes your £6000 annual exemption. 

mantra1

Ok, thanks. Just to be clear: the improvements I have made are deductible when calculating CGT?

So, let's say I sell the property after 5 years. Can I just submit the finalised builders invoice as evidence for why the property increased in value?

For example, I sell in 5 years time. if the property value is then worth 300k, I can deduct 200k (probate valuation) and 65k (improvements). So, I pay CGT on the remaining 35k?

Is there anything else I should be doing now (getting a new valuation before renting it out, etc) to make it easier for myself in the future if I choose to one day sell?

Oh, one more question. If I moved back to the UK and lived in the property after a few years (a few years after renting it out), would I still pay CGT if I one day sold?

Thank you!!

Jeremy535897

You will only need to submit invoices if you are asked. Only improvements (not repairs) can be deducted. This advice considers this question regarding a dilapidated property (although its orientation is towards claiming revenue deductions from rent):
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2030

You also can deduct your annual capital gains tax exemption (unless used elsewhere) of £6,000 for 2023/24.

If you ever live in the property as your main residence, some of the gain will be exempted. See:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet

Valuations at a point in time where the property's usage changes are irrelevant.

mantra1

Thank you so much!

sheramber

purdyoaten2 said:

1 - Yes! Nothing more to say!

2. When you come to sell the gain will be - sale proceeds less value at probate less cost of improvements (generally those items which cannot be simply classed as replacement items or basic repairs which would be set against rental profits). Currently you would be able you tildes your £6000 annual exemption. 

replacement items or basic repairs which would be set against rental profits).

If these were done before letting started can they be set against rent?

Jeremy535897

sheramber said:

purdyoaten2 said:

1 - Yes! Nothing more to say!

2. When you come to sell the gain will be - sale proceeds less value at probate less cost of improvements (generally those items which cannot be simply classed as replacement items or basic repairs which would be set against rental profits). Currently you would be able you tildes your £6000 annual exemption. 

replacement items or basic repairs which would be set against rental profits).

If these were done before letting started can they be set against rent?

See https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505
https://www.taxinsider.co.uk/property-repairs-before-the-first-letting-what-is-allowable

sheramber

Jeremy535897 said:

sheramber said:

purdyoaten2 said:

1 - Yes! Nothing more to say!

2. When you come to sell the gain will be - sale proceeds less value at probate less cost of improvements (generally those items which cannot be simply classed as replacement items or basic repairs which would be set against rental profits). Currently you would be able you tildes your £6000 annual exemption. 

replacement items or basic repairs which would be set against rental profits).

If these were done before letting started can they be set against rent?

See https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505
https://www.taxinsider.co.uk/property-repairs-before-the-first-letting-what-is-allowable

Thank you