Capital Gains Tax

[Budlet]

My father passed away recently, and left his house to me and my brother. We have renovated it and are planning to sell it. Do we pay CGT and if so, how is it worked out? Thanks in advance for answers.

[factor-fiction]

Do you both have another house each?

[Budlet]

I live with my husband but the house is in his name. My brother owns his home jointly with his partner.

[Buenchico]

Unless the improvements added tens of thousands of pounds to the value it's unlikely that there will be an CGT to pay. Here's why:

Assuming that the property isn't your home, you first need to know its market value at the time of inheriting it. Once you've sold it you can ask HMRC to check that you've used the correct market value by completing and submitting form CG34:
http://www.hmrc.gov.uk/forms/cg34.pdf

Add on the cost of the improvements (remembering to charge for your own labour if you did the work yourself). Also add on any additional costs incurred, such as your estate agent's fees, the cost of getting an Energy Performance Certificate, legal fees, etc.

Deduct the total you've now got from the sale price and you've now got the amount that you need to work with when calculating the CGT. (Assuming that you each have a 50% stake in the property, divide by two to get the figure applied to each individual).

If you inherited the house prior to the start of this tax year you will (each) have the annual CGT exemption of £10,900 for 2013-14. You'll also (each) have the CGT exemption for this year of £11,000. So (assuming that you inherited the property in the 2013-14 tax year) that's £21,900 each that you don't need to pay CGT on. So if the increase in the property's value (minus the costs of improving it and selling it) comes to less than £43,800 there will be no CGT to be paid. (Otherwise CGT is payable at 28% on whatever gain is left after deducting your annual allowances).

http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm

[Budlet]

Thanks Buenchico, that is really clear and concise. Much appreciated.