Capital gains tax on property

Holl774

Hello All,

Thank you in advance for any help you are able to give.

I have consulted the government website and note that if you are selling a home in which you do not reside you are liable to capital gains tax (CGT).  However, I need to understand if we can get Primary Residence Relief.

So let me explain the situation:

Mum and dad own a house since 1988, unfortunately mum passes away in 2013, so mums half of the deeds get put into both sons names with a solicitor. This then shows as dad owns 50% of his own house and sons own 25% each. House at this point is worth £300,000.00 10 years later April 2023 dad passes away and the sons the take over dad's half of the property as per the will, the deeds are amended to take dad off, So house is now 50 50 between sons and this is on the deeds... We put the house up for sale in june 2023 after dad passes away...We eventually sell the house for £140,000.00 and exchange contracts in October 2024. does this mean capital gains tax is required, and how much are we looking?

The will states so much needs to go to a relative in the will which we have to do by law, is this taken into account?

Your help is much appreciated.

FlorayG

The house is worth over £300k and you sold it for £140k? Typo to correct, I think 

Holl774

FlorayG said:

The house is worth over £300k and you sold it for £140k? Typo to correct, I think 

Dam sorry my typo £440.000.00

poppystar

What was the valuation for probate on the second death? 

Putting names on the deeds prior to selling does mean they will be liable for CGT on the increase since second death.
Did the Will on the first death create an IPDI giving dad the right to remain in the house until he passed or started cohabiting etc? If so the CGT clock won’t have started ticking until after dad passed. 

If there was an increase between dad’s death and the change of names that part will lead the estate to a CGT liability. In other words we need more values than at mother’s death and eventual sale in order to see the complete picture. (You can edit your post to put the correct sale value in).
You will also be able to claim selling fees (EA and conveyancing) to reduce the increase in value liable for CGT.

Holl774

Thats Poppystar, its my first post and not to sure how to edit original post? can you advise? 

Yes the will on the first death of mum give dad the right to remain in the house, and also then the sons was put on the deeds of the house. You say the clock wouldn't of started ticking until after dad passed? why is this, as the sons was put on the deeds of the house back in 2013 so in theory partial owners. 

There wasn't much of an increase between dads death and the change of names on the deeds as this was 2 months, this would then allow us to put the house on the market. The house was 300k at mothers death, and at dads death it was valued at £440k and thats what we have sold it for. Does that help?

Keep_pedalling

Unfortunately it was a mistake putting half the house in their names. The sensible thing to do would have been to set up an immediate post death interest trust with the surviving spouse have the right to live there for life. This would have avoided any CGT liability for the sons as the thrust would have been the legal owner and the father the beneficial owner.
 

Holl774

KEEP_Pedalling unfortunately this was done by the mum and dad and they thought they was doing their best.  This was done incase the mum OR  dad ended up in carehomes and was unable to pay for the costs of the care homes, it wouldnt go into the whole costs of the house and only their part of it. ... 

Keep_pedalling

Holl774 said:

KEEP_Pedalling unfortunately this was done by the mum and dad and they thought they was doing their best.  This was done incase the mum OR  dad ended up in carehomes and was unable to pay for the costs of the care homes, it wouldnt go into the whole costs of the house and only their part of it. ... 

Sounds like they were poorly advised, an immediate post-death interest trust would have done the same job but in a more tax efficient way. 

FlorayG

Well that's water under the bridge - OP wants to know what the situation is now

Keep_pedalling

They are each going to have around £30k in taxable gain once selling cost and annual allowances are taken into account which, depending on their income, will be taxed at between 18 and 24%. This needs to be paid within 60 days of the sale. There is a calculator on the following link.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/disposal-date

poseidon1

Keep_pedalling said:

They are each going to have around £30k in taxable gain once selling cost and annual allowances are taken into account which, depending on their income, will be taxed at between 18 and 24%. This needs to be paid within 60 days of the sale. There is a calculator on the following link.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/disposal-date

The conveyancing solicitor should have been competent to advise and assist the sons with their property cgt compliance obligations based on the information outlined by the OP.

 See below a general guidance note for solicitors prepared by one of the leading Chartered Accountancy practices in the UK. This particular note is a little out of date in quoting 2023/24 tax rates but the general principles are sound enough,


https://www.pkfsmithcooper.com/news-insights/capital-gains-tax-return-on-uk-property-a-guide-for-solicitors-and-conveyancers/#:~:text=As solicitors and conveyancers, you,calculate your client's capital gain