Inherited Second Property and Taxation

In message , Carlos writes

Condolences to you and your family.

No. I assume the estate was below the IHT Threshold. If you sold P2 now then you would only be taxed on any gain in value on the sale price over the value of property on the day your mother died, less any taper relief (likely nil) and you annual allowance. In addition, if the costs you referred to above were of a capital nature, not just repairs etc.,, then these costs could be offset against any gain.

I think a chargeable gain is unlikely based on the figures disclosed but if there is a taxable gain it will be charged at your added to your income in order to decide the rate charged. If there is a chargeable gain then if you make P2 your principal private residence for a while then so long as you sell it within 3 years of your mothers death then you should avoid CGT completely.

AIUI, you could be liable for CGT on the *increase* in value of your mother's property, less what you have spent on it. So, if it was worth 180k when you inherited it and you sell it for (say) 250k, the gain is 70k but the net gain is only 40k after your 30k expenses. You can offset your CGT allowance (10k?) against this - leaving you to pay tax at your marginal rate on the remaining 30k. If the inheritance is shared by more than one person (e.g. sibblings or spouse), there will be more than one lot of allowance you can use - and less tax to pay. If you sell it for 220k or less, there won't be any tax, anyway.

Others have pointed out that any CGT would be based on the increase in value, not the absolute value. I would point out that the 'purchase price' used for the CGT calculation is the probate value.

Since the estate was, apparently, below the IHT threshold, you could have pushed for the highest acceptable probate value that capital taxes would agree (up to a maximum so that the estate remained within the nill IHT band). You would then be deemed to have obtained the house at that higher price so the capital gain (when you later sell it) will be reduced.

Robert