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HI SAM. I INHERITED A HOUSE 5 YEARS AGO AND HAVE SPENT CIRCA

Resolved Question:

HI SAM. I INHERITED A HOUSE 5 YEARS AGO AND HAVE SPENT CIRCA £100K IN PROPERTY UPGRADE AND DECORATION SINCE THAT TIME. IF I SELL THE HOUSE FOR £150K WHAT ARE THE TAXATION IMPLICATIONS. THE HOUSE IS NOT MY MAIN RESIDENCE I.E. IT IS A SECOND HOME. I AM CURRENTLY A BASIC RATE TAX PAYER WITH SALARY EARNINGS OF £40K.
Submitted: 10 months ago.
Category: UK Tax
Expert:  Lindie-mod replied 10 months ago.

Hello,

I'm Lindie, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.

If I can help further, please let me know. Thank you for your continued patience.

Best,

Lindie

Expert:  Sam replied 10 months ago.

Hi

 

Thanks for your question

 

Can you advise what value the house was when you inherited it, and confirm how the £100K spent on the property is made up - was it all capital improvements or some of that amount general repairs and decorating.

 

Thanks


Sam

Customer: replied 10 months ago.


Value at inheritance was £60k. The upgrade costs were approximately £70k on capital such as new windows etc and £30k on repairs and decorating.

Expert:  Sam replied 10 months ago.

Hi

 

Thanks for your response

 

The capital gain position is as follows

 

If sold for £150K then the £60 can be deducted as this is the value when the house was inherited - this leaves an initial gain of £90K

 

From this £90K you can deduct the capital costs - and you advise this to be ££70K - so this leaves £20K

 

From this £20K you can also claim the costs to sell, so legal and estate agent fees - which I estimate will cost you approx. £2000 - so this leaves £18,000 to consider.


Then you also have the first £10,600 as exempt, as this is the annual exemption allowance for capital gains, so this leaves just £7400 to consider.

 

As your annual income is £40,000 - then you have £2,475 unused basic rate band which will allow the first £2,475 of the gain to be charged at 18% = £445.50 and then the remaining gain £4925 liable to 28% capital gins = £1379

So your total capital gains bill will amount to £1824.45

 

You should advise HMRC when this property is sold, so they can arrange to issue you with the appropriate self assessment tax return on which you must declare all income, including this capital gain. Any tax due is then payable no later than the following 31st Jan

 

So for example of you sell before 05/04/2014, then you will complete a 2014 tax return and pay any tax owed no later than 31/01/2015.

 

Do feel free to ask any follow up questions

 

Thanks


Sam

 

 

 

 

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12791
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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