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Hello, my Mum left me and my sister her bungalow 4 years ago.

Customer Question

I have got a house...

Hello, my Mum left me and my sister her bungalow 4 years ago. I have got a house which I just can't seem to sell. I wanted to sell it and move into the bungalow. As I can't I want to sell the bungalow but I would like to know how I get around not paying capital gains tax.
I know it is classed as a second home. I am quite happy to live in it for a few months if this helps. How many months would it have to be? Is it necessary. I did live in it last year for 3 months. The bungalow is in a state of disrepair and is worth £150-200K. Please can you advise me?

Submitted: 12 years ago.Category: UK Tax

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2/24/2011

UK Tax Professional: Tony Tax, Tax Consultant replied 12 years ago

Tony Tax, Tax Consultant

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Hi.

Can you tell me what the bungalow was worth when your mother died please.

Customer reply replied 12 years ago

Hi,

I had valuations of between £150-200K. That was 2-3 years ago.

We did not pay any inheritance tax. For probate I think we said it was worth £160k, I think.

I will try and sell it as a bungalow with a potential building plot in the garden, so I can get the higher price.

Please let me know if you need any more information.

Thanks

Glen

UK Tax Professional: Tony Tax, Tax Consultant replied 12 years ago

Thanks.

There will only be a taxable gain if the bungalow is sold for more than it was worth when you inherited it. Even the, the first £10,100 of any gain each of you and your sister makes will be exempt due to the CGT exemption.

The Revenue are looking more closely at situations where somebody moves into a property for a short period in order to try to avoid CGT so even if you did this for six months or a year it may not work. If it was sold for £200,000 and had a probate value of £160,000, your share of the gain would be £20,000 with the first £10,100 being exempt. CGT would be payable on £9,900 at 18% or 28% or a combination of the two rates depending on your income in the tax year the property is sold.

Let me know if you have any queries.

Customer reply replied 12 years ago

What if we sell it for £250k. Please can you tell me how much cg tax we would pay then please.

Thanks

Glen

UK Tax Professional: Tony Tax, Tax Consultant replied 12 years ago

If you sell it for £250,000 and the probate value was £160,000 then you will each make a gain of £45,000. The first £10,100 of each of your respective gains would be exempt from CGT and you would each pay between £6,282 and £9,772 in CGT depending on your respective incomes in the tax year you sold the property.

If you and your sister are married, you could add your spouses to the deeds to get two extra CGT exemptions which could save between £1,818 and £2,828 for each couple. However, if your spouses are higher rate taxpayers this may not work to your advantage.

Tony Tax, Tax Consultant

Category: UK Tax

Satisfied Customers: 16,712

Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.

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