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Capital Gains Tax
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I am soon to inherit a house in my mothers will. I am unclear as to the CGT liability on me after I sell the property. I intend to do it up first.
Anyone help ?
Anyone help ?
Answers
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I'm in a similar situation, with some rental property. I have been told that you are liable to tax on the increase in value of the property, since you got it. The initial value used is that used in the calculations for the value of the estate. You'll probably need to contact the excutors of the will to determine this.
So the total tax liability is the difference between the 'estate value' and the resale value. And if you take a long time doing it up, you can take this into account, as your CGT allowance is an annual allowance.
So the total tax liability is the difference between the 'estate value' and the resale value. And if you take a long time doing it up, you can take this into account, as your CGT allowance is an annual allowance.
The Capital Gain will be the sale proceeds, less the value of the property at probate.
From this you may deduct the costs of sale, plus the cost of improvements to the property. This will not include general maintenance, but would include the costs of, for example, an extension, upgraded windows (ie single to double glazed), installation of central heating (where there was none before).
If you own the property fof 3 years or more, you start to become entitled to a taper relief, starting at 5% of the gain.
If you live in the property before you sell it, you may be able to reduce or remove any tax liability, but this depends on whether you own another property.
Finally, you are entitled to an annual exemption from Capital Gains Tax, currently �8500. This applies ONLY to the tax year you sell. Any gain left after the exemption, is taxed as if it were your highest slice of income for the year.
If you are married, it may be worth considering transferring half of the property to a spouse, to utilise another annual exemption/basic rate band.
From this you may deduct the costs of sale, plus the cost of improvements to the property. This will not include general maintenance, but would include the costs of, for example, an extension, upgraded windows (ie single to double glazed), installation of central heating (where there was none before).
If you own the property fof 3 years or more, you start to become entitled to a taper relief, starting at 5% of the gain.
If you live in the property before you sell it, you may be able to reduce or remove any tax liability, but this depends on whether you own another property.
Finally, you are entitled to an annual exemption from Capital Gains Tax, currently �8500. This applies ONLY to the tax year you sell. Any gain left after the exemption, is taxed as if it were your highest slice of income for the year.
If you are married, it may be worth considering transferring half of the property to a spouse, to utilise another annual exemption/basic rate band.
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