capital gains tax when selling second property help please.

Jof1967

the situation is as follows.

We were 3 brothers our father passed away in 2014 and the property value for probate was divied equally between us £375k =125k each.

Our brother who had lived in the property died in 2021 and as per his will his share was split between myself,my brother and my sister in law.

Question.does the increase in property share alter the inherented value when we have sold the property when dealing with cgt?.We do not know the house value when he died,in fact his name was still on the deeds when we sold the house and supplied a copy of his death certificate to the buyers solicitor.

We have sold the property for 580k.No other properties have sold there in recent years,so i have no way of calculating the increase in value since his death.

i know we can subtract both estate agent and solicitor fees for cgt purposes,both any and all advice is welcome,thank you.

i know we will have to pay cgt,i just have no idea how to work out how much.

Dazed_and_C0nfused

Jof1967 said:

the situation is as follows.

We were 3 brothers our father passed away in 2014 and the property value for probate was divied equally between us £375k =125k each.

Our brother who had lived in the property died in 2021 and as per his will his share was split between myself,my brother and my sister in law.

Question.does the increase in property share alter the inherented value when we have sold the property when dealing with cgt?.We do not know the house value when he died,in fact his name was still on the deeds when we sold the house and supplied a copy of his death certificate to the buyers solicitor.

We have sold the property for 580k.No other properties have sold there in recent years,so i have no way of calculating the increase in value since his death.

i know we can subtract both estate agent and solicitor fees for cgt purposes,both any and all advice is welcome,thank you.

i know we will have to pay cgt,i just have no idea how to work out how much.

Given you are dealing with not insignificant sums and any CGT paid personally is in part dependent on your income for income tax purposes would it worth considering using an accountant for this?

You also have the strict time limit for reporting to contend with.

Do you have family and friends who might be able to recommend a suitable accountant in your local area i.e. a well established bricks and mortar firm.

silvercar

A load of assumptions, but my 'back of the envelope' working. Please feel free to correct or chime in.

You have one third of the property from 2014 to 2025. So 580/3= 193k- 125k = 68k gain.

Then you have the third your late brother inherited that was divided in 3 in 2021. For this you need a starting point of its value in 2021. You are going to have to find this out, possibly by using a RICS surveyor for a valuation. For this calculation, lets assume the 2014 valuation was £500k. so 42k which represents 1/9 of the 580k ie 64k. The one ninth share of the sale price would be 56k. So your gain on this snippet was 64-56=8k gain. 

So your total gain is 76k. Taxed at 18% or 28% depending on your marginal rate.

Caveating the above:
a) I didn't take off any selling costs (I assume there were no buying costs as you inherited)

b) the 2021 valuation may need to allow for the valuation of a property where there was someone living in it who had the right to be there paying no rent. That could depend on whether there was a specific clause in your father's will giving him the right to do so. If it was only the generosity of you and your other brother, this isn't an issue.

c) I assumed the sister in law was the wife of your late brother and she has now moved out - she has a different calculation as she didn't inherit on the death of your father

d) Are you selling now because your sister in law had the right to live in the property from 2021? If so that could effect the calculation

silvercar

"Our brother who had lived in the property died in 2021 and as per his will his share was split between myself,my brother and my sister in law."

Are you sure this is correct? It would seem odd for your late brother not to give all of his share to his wife, given that he only owned a third of the property. Why would he keep dividing up, mirroring his father's will? Could he have thought that he had inherited the whole property and was now dividing it up according to his late father's will/ wishes?

poseidon1

Jof1967 said:

the situation is as follows.

We were 3 brothers our father passed away in 2014 and the property value for probate was divied equally between us £375k =125k each.

Our brother who had lived in the property died in 2021 and as per his will his share was split between myself,my brother and my sister in law.

Question.does the increase in property share alter the inherented value when we have sold the property when dealing with cgt?.We do not know the house value when he died,in fact his name was still on the deeds when we sold the house and supplied a copy of his death certificate to the buyers solicitor.

We have sold the property for 580k.No other properties have sold there in recent years,so i have no way of calculating the increase in value since his death.

i know we can subtract both estate agent and solicitor fees for cgt purposes,both any and all advice is welcome,thank you.

i know we will have to pay cgt,i just have no idea how to work out how much.

Assuming the facts are exactly as you stated, then a retrospective valuation of the house is required in 2021 when you brother died.

This is because his 1/3rd share received a CGT free uplift to market value at that time, and everyone who inherits his 1/3, acquire at the up lifted value.

Therefore you and your surviving brother have two costs figures, 1/3rd at £125k (2014) and a further 1/9th of the 2021 death revaluation ( whatever that is). As for sister in law if she has been  living there since 2021 she has no CGT liabilty due to the main residence exemption.

As suggested by Dazed_and_confused, may make sense to enlist the services of an accountant to assist the three of you with the tax compliance.

However, as with Silvercar I am similarly baffled why your deceased brother evidently chose to pass his 1/3 rd to anyone other than his own wife.

I suspect there are nuances and details overlooked here such as how it came about the deceased solely occupied the property after your father's death and you and your sibling were content to leave your 1/3rd shares in the property  in situ indefinitely.  Makes me wonder if you father's will may have had some form of trust provision within it which permitted your brother's occupation.

Jof1967

Just to clarify the sister in law who was leftt a 3rd in my dead brothers will, was my still living other brothers wife.
My dead brother had no relatives or wife, apart from us two surviving brothers.
We were happy to let my now dead brother to continue to live in the house.
There was no stipulation in my fathers will but he had no where else to live.
i will as a matter of urgency contact an accountant.