Capital Gains on house.
Discussion
Right, at the moment this is hypothetical but that might change in the next month.
Me and my sister are about to inherit a house. We both lived in this house as children until we moved out (sister - 6/7 years ago, me - 3/4 years ago).
Let’s say the house is valued £150k, well within £325k for inheritance tax (even with another property we might be inheriting).
Work needs to be done on the house to make it liveable/sellable.
During this work I will probably move back in and it would become my main home. My sister will not be able to do this as she works too far away.
Work would take about 1-2 years, no need to hurry as we would want to wait 2 years anyway to avoid HMRC getting interested if there were 'profits' as they could ask for some inheritance tax.
When we come to sell it, will the issue of only one of us living there permanently be an issue regarding Capital Gains tax.
I’ve tried to do some reading up on it, but any links or useful reading would be appreciated! If you have any other comments post away!
I’m sorry if this makes no sense – I’m still trying to get everything clear in my head!
Also – not sure if this is even the right place for this!
Me and my sister are about to inherit a house. We both lived in this house as children until we moved out (sister - 6/7 years ago, me - 3/4 years ago).
Let’s say the house is valued £150k, well within £325k for inheritance tax (even with another property we might be inheriting).
Work needs to be done on the house to make it liveable/sellable.
During this work I will probably move back in and it would become my main home. My sister will not be able to do this as she works too far away.
Work would take about 1-2 years, no need to hurry as we would want to wait 2 years anyway to avoid HMRC getting interested if there were 'profits' as they could ask for some inheritance tax.
When we come to sell it, will the issue of only one of us living there permanently be an issue regarding Capital Gains tax.
I’ve tried to do some reading up on it, but any links or useful reading would be appreciated! If you have any other comments post away!
I’m sorry if this makes no sense – I’m still trying to get everything clear in my head!
Also – not sure if this is even the right place for this!
Edited by AndrewEH1 on Thursday 5th July 13:15
AndrewEH1 said:
We will own, as this is now going ahead:
1/4 share each in one flat
5/12 share each in another flat
1/2 share each in the house I am posting about.
The two flats will be rented so are not really an issue.
I am not an expert but:1/4 share each in one flat
5/12 share each in another flat
1/2 share each in the house I am posting about.
The two flats will be rented so are not really an issue.
They ARE an issue if you ever come to sell them.
You will have to pay any CGT.
Unless you have lived in one/both of them in the last 3 years, IIRC and sell them within that 3 year window.
Also strictly your sister will have to pay CGT when you sell this new house since it is NOT her main home.
Obviously you COULD put her name on some bills in order to attempt to claim that she lives there so she doesn't have to pay CGT but that's fraud.
AFAIK you can buy and place and sell it in a three year window so long as you have lived there for a while as your main home.
This explains it much better: http://www.hmrc.gov.uk/cgt/property/sell-own-home....
Edited by walm on Friday 6th July 14:41
AndrewEH1 said:
We will own, as this is now going ahead:
1/4 share each in one flat
5/12 share each in another flat
1/2 share each in the house I am posting about.
The two flats will be rented so are no really an issue.
If you both expect to live for another 7 years plus, you should get them independently valued and gift the shares to each other such that you each end up with the same net value but you are the sole owner of the house you are going to live in. If the numbers work out then try and remove the joint ownership in the other properties too. If your sister is expecting to receive 50% of any uplift in value fron the eventual sale of the house you can cover that as another gift at the time of sale.1/4 share each in one flat
5/12 share each in another flat
1/2 share each in the house I am posting about.
The two flats will be rented so are no really an issue.
Financial Advisers rend to be people who sell financial products and receive their income from commission from the sale of such products. Some (relatively few) receive their income on the basis of time charged.
They are not normally well versed in tax or accounting matters. That is the preserve of accountants and tax experts.
They are not normally well versed in tax or accounting matters. That is the preserve of accountants and tax experts.
If you inherit a property but it is and never has been your Main Residence, then, if and when that property is sold or disposed of in some other way at a later date, there is a good chance that you will need to pay Capital Gains Tax when the property is sold.
Living in a property when you were a child does NOT confer "Main Residence" status on that property. For a property to be a Main Residence, it needs to have been both lived in AND OWNED (or rented at a normal commercial rates) by the person who is selling. Being the child of the former owner is not good enough.
When a property is inherited rather than purchased, the cost of the property for Capital Gains Tax is the Market Value at the date of propate or transfer.
Living in a property when you were a child does NOT confer "Main Residence" status on that property. For a property to be a Main Residence, it needs to have been both lived in AND OWNED (or rented at a normal commercial rates) by the person who is selling. Being the child of the former owner is not good enough.
When a property is inherited rather than purchased, the cost of the property for Capital Gains Tax is the Market Value at the date of propate or transfer.
Eric Mc said:
If you inherit a property but it is and never has been your Main Residence, then, if and when that property is sold or disposed of in some other way at a later date, there is a good chance that you will need to pay Capital Gains Tax when the property is sold.
Living in a property when you were a child does NOT confer "Main Residence" status on that property. For a property to be a Main Residence, it needs to have been both lived in AND OWNED (or rented at a normal commercial rates) by the person who is selling. Being the child of the former owner is not good enough.
When a property is inherited rather than purchased, the cost of the property for Capital Gains Tax is the Market Value at the date of propate or transfer.
Thanks for that, clears a few things up.Living in a property when you were a child does NOT confer "Main Residence" status on that property. For a property to be a Main Residence, it needs to have been both lived in AND OWNED (or rented at a normal commercial rates) by the person who is selling. Being the child of the former owner is not good enough.
When a property is inherited rather than purchased, the cost of the property for Capital Gains Tax is the Market Value at the date of propate or transfer.
Perhaps Financial Advisor was the incorrect term, seems to have got a few people in a tizz. I really just meant someone who deals with money/tax.
I will probably be moving back into the house for 1-2 years while work is being carried out.
Anyway, things are on their way to be sorted out which is good in some respects but now leaves the task of renovation...
Eric Mc said:
By moving in and living there for a few years it WILL become your Main Residence for that period PLUS three "free" years. So, that will help in reducing YOUR share of the Capital Gains Tax bill.
Is it only the final 3 years of ownership which qualify for the "3 free years"?The jiffle king said:
Eric Mc said:
By moving in and living there for a few years it WILL become your Main Residence for that period PLUS three "free" years. So, that will help in reducing YOUR share of the Capital Gains Tax bill.
Is it only the final 3 years of ownership which qualify for the "3 free years"?Eric Mc said:
The jiffle king said:
Eric Mc said:
By moving in and living there for a few years it WILL become your Main Residence for that period PLUS three "free" years. So, that will help in reducing YOUR share of the Capital Gains Tax bill.
Is it only the final 3 years of ownership which qualify for the "3 free years"?I'm not sure what you mean by "the last three years".
If you owned a house for ten years - lived in it for four years and rented it out for six years, even though it was your Main Residence for only four of the years of ownership, you are credited with seven years as your Main Residence when computing the gain.
As far as I am aware, it does not matter if the period you lived in the house was continuous or not.
If you owned a house for ten years - lived in it for four years and rented it out for six years, even though it was your Main Residence for only four of the years of ownership, you are credited with seven years as your Main Residence when computing the gain.
As far as I am aware, it does not matter if the period you lived in the house was continuous or not.
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