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Selling Second Property
So you inherit a house and get a probate figure (in writing) from the Estate Agent. Most Estate Agents know the score and tend to value down the property to help reduce any inheritance tax that may be due. Later, you sell the house. Either straight after obtaining probate or after renting it out for a period of time. This will incur 40% capital gains tax in the difference between the value at the time of inheritance and the sale value. So what figure is used for 'the value at the time of inheritance'. Does a rough estimate suffice or is the probate figure used?
Answers
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It is the difference between probate figure and sold price. Don't forget that you, and any other co-owners, can make £11,100 gain each before having to pay CGT.
14:25 Mon 27th Apr 2015
Woofgang - that`s the problem. The Estate Agent gave us an erring on the side of caution figure then my sister asked her to lower it even more which she did. That is the figure that I will use for probate but it have more of an impact re capital gains when I sell. Typical of my sister to stick her oar in. I have two letters from the Agent - one which is for probate and a higher one for marketing purposes. I`m wondering if the probate one is what I have to go on though because that figure will be recorded on official forms.
I agree with jennyjoan. I think the best place to have money is in property! Even in a recession. Interest in a bank is minimal, otherwise after you have sold the property, paid the estate agent, solicitor, plus their VAT, paid your 40% tax, bought a new car, had a few holidays and given money to relatives who have suddenly popped up after 25 years ..... You wont have any left. Keep the property, rent it out, pay tax on your rent, you will still have a property going up in value which you can leave to your kids and money in the bank every minth. What were you proposing to do with the money when you sell if you dont mind me asking? Any of the above?
smurf - I`ll sell both houses and go back to Devon and buy a big, f*** off house by the sea :-) That`s why I`m not sure about renting it out. If I see something I want in Devon I would want to sell up quickly and not have to dispose of my two properties here. I`m undecided yet though as it`s early days.
You say "will use" are you saying that it hasn't gone through probate yet? If that is the case, then get a different valuation! From what you say you risk getting into trouble for committing fraud if you submit a deliberately low valuation. I am guessing that Sis gets a share of the estate and does'nt want her share reduced by inheritance tax?
Thanks ubasses. Yes, I will have to contact the estate agent and get her to re-write the letter giving the original figure. Yes, the property is split 50/50 but my sister doesn`t want her half so will be doing a deed of variation. That is why she couldn`t care less if I get stitched up with capital gains tax due to her low figure.
I have just noticed you mentioned 40% tax rate. That would be for IHT but CGT is 18% for lower rate tax payers or 28% for higher rate, or if the gain you make takes your income into higher rate bracket.
I think you are right not to submit a silly low value for probate which would look like tax avoidance, if there is any IHT to pay on the estate, you would benefit from submitting the lower of the Agents sensible quotes.
I think you are right not to submit a silly low value for probate which would look like tax avoidance, if there is any IHT to pay on the estate, you would benefit from submitting the lower of the Agents sensible quotes.
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