Capital Gains Tax Help

edited 30 November -1 at 1:00AM in Cutting Tax
2 replies 784 views
butterflyladybutterflylady Forumite
319 Posts
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edited 30 November -1 at 1:00AM in Cutting Tax
Hi everyone,

I'm really hoping that someone will be able to give us some advice, this is a very long story but I will try and make it short and too the point.

In 2000 my MIL purchased her council house on the right to buy scheme, my DP and his sister provided the money for this. At the time they were told to put the house in all 4 names, BIL. MIL, SIL and DP.

BIL moved out of the property in 2000 but his name was kept on the deeds.

DP moved out of the house in 2005 (4 years ago).

SIL still lives in the house, MIL sadly passed away last year.

When MIL past away her name was removed from the deeds. SIL has been paying BIL and DP rent each month however this has for a variety of reasons not worked.

It was decided that she would buy them both out of the house. Todays at least 4 weeks into the process of buying them out she has mentioned Capital Gains Tax, this is something we had never thought of as the house was just thought of as my MIL.

We are now trying to work out how much if any Capital Gains Tax my DP will have to pay on his money.

He put £7000 towards the purchase in 2000 and is now being offered £30,000, the house was his main residence until September 2005. He has done countless DIY jobs over the years to improve the value of the house.

My current thinking is that he has to take away the amount he paid for the house from the amount offered, leaving £23,000. There is then a disregard of the first £10,000 this leaves £13,000 to pay capital gains tax at 18%.

I'm not sure whether there is a disregard thinking to the DIY he has done which has increased the value of the property. Also I seem to think that I should be trying to find out the property's value in 2005 to take away from the current valuation as that was when he left.

But I don't know.

I would be grateful for any help, I am 21 weeks pregnant with our second child, this money was due to set us up and help remove stress, instead I'm sat yet again on the verge of tears.

Butterfly

XXX

Replies

  • In order to help, we need to know:
    1. The purchase price of the property'
    2. Who did MIL leave her share of the house to?
    3. What was the value of the house at MIL's death?
    £705,000 raised by client groups in the past 18 mths :beer:
  • butterflyladybutterflylady Forumite
    319 Posts
    Part of the Furniture Combo Breaker
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    Thank you both for taking the time to reply.

    As I understand the total purchase price was £15,000, the £7,000 put in by my DP and £8,000 put in by SIL. As it was a right to buy this would have been a discounted rate on the market value.

    I have no idea what the house was valued at, at May last yea when my MIL past away. Current valuation on the house 3 estate agents between £105,000 and £112,000. Mortgage lenders have come back with a valuation of £95,000. House prices have stood up here relatively well so I would guess around the same price.

    MIL name was just taken off the deeds, her share was split equally between the 3 of them.

    How would we go about proving this to the tax man would we just tell him or do we need actual paperwork?

    Also a quick question about my BIL, my thinking was that as he had put on money into it, he could claim that his share was a gift from MIL and that as it was over 7 years ago it would be ignored for CGT.
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