Capital Gains Tax/Inheritance Tax

stressedoutmumof1

Hi there, was wondering whether anyone could clarify a situation for me!!

My father inherited half of my Grandad's house. He sold off some of the land and has since now sold the house. In total the house and land sold for £270,000. My father has half of this £135,000.

He was worried that he would have to pay inheritance tax and noone would tell him whether he needed to or not. So to cut a long story short he visited his local tax office. They told him that he doesn't need to pay inheritance tax but he will have to pay capital gains tax!! As the land was sold in the last tax year - he is late in paying this and now has to pay a fine as well. He doesn't have to pay the capital gains tax on the house until the end of this tax year. Paying the money isn't a problem (my Dad is strictly a cash/cheque man - if only we could all be like that...) but I'm sure the information he has been given isn't correct - and I don't want to hand over the cash if he doesn't need to.

Any light shed on this matter would be greatly appreciated!

sneekymum

CGT is only due on the increase in value of the house & land from the point at which it was received as an inheritance. This profit can be reduced by taper relief and by deducting certain expenses - eg those associated with selling such as agents and solicitors fees. And then your dad's share of the profit is only half. At the end of the day your dad has a CGT annual allowance of £8,500 before any tax is due. So it was good to stagger the sales over two tax years even if this was an accident.

How long ago did he inherit? If it was fairly recently then there won't be too much tax to pay if he didn't sell for much more than the probate valuation.