Caught out by changes to Capital Gains Tax

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    The probate resets a lot of the stuff, but my main response was unapproved


      Refurbishment while you were living there is only allowable against CGT if it was solely and exclusively for the business, so if it was to prepare the property to be let, it would be OK.
      If it was simply to improve what was then your home, it fails the basic test.

      Get yourself to an accountant.

      While you owned it with parents, they had a share of the gain, so if the three of you owned it, you are liable for 1/3rd of the gain for that period. If you were living there as your main or only residence, the gain is tax free for that period.
      When your parents were alive, again your share of the gain is 1/3 for that period - and from the sound of it, there's a subsequent period when it's 1/2 and then the liability is all yours.

      I can't work out from your posts when in the sequence the property was let out.

      If the property was bought before 1982, the gain is spread over 39 years, with 14 of them being taxable. So about a 1/3rd of the gain (less £12,300) is taxable.
      For any period either or both of your parents owned a share of the property, that amount will reduce correspondingly.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


        JP Keates et al - thank you very much for your assistance. I have this afternoon emailed an accountant to try and get an appointment urgently. I hadn't realised it was all so complicated and it was remiss of me to not be aware of the CGT changes made in 2020 due to not renting out the property. Thanks again.


          JP Keates
          I wasn't aware that refurbishment deductions only applied in terms of letting out the property. On the CGT calculator it asked 'How much have you spent on improvements since you became the property owner'.....

          Here's the timeline:

          March 1982 - 1992 3 Owners, my principal residence - so gain is tax free for this period.
          1992 -2007 2 owners - only Father living in property - so gain is 1/2 for me [shared with Father] ?
          2007-2021 Just myself as sole owner so liability solely mine for this 14 year period.
          Property RENTED out intermittently
          Property EMPTY period June 2018-January 2021

          So I can claim for refurbishment made to rent out the property in 2007 but not improvements made previously? That's not clear on the CGT calculator form.
          Gain is over 39 years and I am liable for 14 years you say - so that's the difficult part working out my liability for these 14 years?
          You're right this is properly difficult so I will need to engage with an accountant and hope that self-declaring, albeit outside the new timescales, will mean HMRC don't throw the book at me.

          I'll post back with the outcome in the hope it helps others who find themselves in a similar situation.

          I appreciate your time and assistance.
          Thank you.


            Originally posted by AndrewDod View Post
            You are really short on detail:

            Date (year & month) bought in joint names ______ (what % was yours then)
            Date it converted to your sole name ______ (presumable date of death of parent 2?)
            Declared vale at probate _________
            Capital expenses between date of probate 2 and now _____________
            Final sale value/date _______
            Expenses relating to sale itself (estate agent, lawyer)

            Years you actually lived there as your ONLY home in the above _______________
            Andrew, apologies only just seen your post [was it awaiting approval did you say?] answers are:

            Purchased March 1982 as joint tenancy - so equal split of 33 1/3% each party
            Parent 2 died September 2007 - as joint tenancy I inherited their share - so at this point I own 100% of property
            No probate - Parent 2 died intestate [as did Parent 1] so declared value, I have looked online for similar sold properties [same street] £60k in 2007.
            Capital expenses between 2007 and now - c. £5k
            Final sale value/date - January 2021 - £80k
            Expenses relating to sale itself [estate agent, lawyer] £2k
            Years lived there as only home - 10 years

            I've been doing some more research and found this - 'If legal title to the property is transferred to the beneficiary or beneficiaries following the deceased's death, their base cost for capital gains tax purposes is the market value at the date of death'. It's late, I'm tired, I'm stressed but does this mean then that CGT is based on 2007 market value [when I became sole owner] and subsequent uplift/sale price in 2021. In that case the uplift is £20k less capital expenses, PRR and the CGT allowance? I was using the CGT online calculator which didn't allow for this calculation.
            Will look at this with fresh eyes tomorrow if I can get some sleep tonight. Thank you


              Originally posted by Gordon999 View Post
              It seems to me your capital gains tax problem is rather complex and requires some help from a tax accountant. But before contacting the tax accountant , you need to collect all of the information.

              (a) Your "total capital gain" = your property sale proceeds ( Jan 2021) minus your 3 part "entry cost".

              (b) Your 3 part "entry cost" for the property = .1/3rd of cost ( at April 1982 ) + 1/3 rd valuation ( first probate ) + 1/3 rd Valuation( second probate ) plus improvement costs. .

              (c) The "April 1982 valuation" should be provided by a local surveyor or local estate agent.

              (d) The "total capital gain" is apportioned between the "rental period" and the "self-use period" ( your stay plus parents stay )
              Thank you Gordon, didn't see your response this afternoon. I will look at this with fresh eyes tomorrow as it's late now.
              I've put some figures in my reply to a post just now but answers below to your questions.

              a] £80k Jan 2021 sale price.
              b] As property purchased before 31.03.82 I understood it's the market value at this date and not the price paid? So £20k. If that's not correct then it would be £6,500-ish
              There was no probate at time of Parent 1's death so no market valuation.
              There was no probate at time of Parent 2's death so no market valuation.
              c] Market value in 2007 at time of Parent 2's death - £60k [I've taken the sold prices from similar properties on same street in 2007] but can obtain valuation from local surveyor/estate agent.
              d] Total capital gain. Do I take this from 2007 market value to 2021 date of sale? If so that would be £20k under first scenario and £33k-ish under second scenario.

              10 year period when property was my only residence so can claim PRR, also improvement costs.

              I definitely need an accountant to sort this out .


                As gordon indicates you need to consider it in three entirely separate parts, each have their own gain and calculation --

                The part YOU owned before Death 1
                The part YOU owned between Death 1 and Death 2
                The part you owned after Death 2

                Based on the values you give you are unlikely to have to pay tax on this (my previous comments noted) but was it really the case that the whole property which was valued at £60K in 2007 only sold for £80K 15 years later. That sounds a tad odd.


                  Morning Andrew
                  Thanks for your response early this morning and clarifying I have to make three separate calculations [the split wasn't clear on the CGT calculator].
                  I understand the query on the value but this is an ex council house on a council estate [I feel I have to defend it here as 'council estate' gets a bad press but this was a nice estate built in early 1950s, well kept [doorsteps scrubbed etc.] where occupants were grateful to have a council house [mining village] and I obtained these figures from the Land Registry sold prices in the same street.
                  The uplift of just £20k over 15 years is correct from 2007 to 2021.
                  In 2005 the prices were actually higher but then in 2007 there appeared to be a slump in prices.
                  I extended my search on the LR Open Data for sold prices in wider area and with a couple of notable exceptions [where the houses have had additional bedrooms/loft extensions added] the average uplift for this period is indeed c£20-£25k. Some properties decreased in value or made only a marginal increase, i.e 2006 to 2012 £1k increase/2009-2014 £5k increase/2000-2014 £19k increase/1995-2005 £10k increase.

                  When I worked out my dues in 2019/2020 when trying to sell [the council had released some new accommodation hence to decrease in demand for rent/sale] I didn't owe any CGT due to lettings relief etc. I'll redo my calculations now based on the three separate periods and take the figures to an accountant for advice.
                  Thanks again


                    I don't know the historic thresholds, but it's bizarre that there's no probate for both of your parents, their estate has to be tiny for that to be possible nowadays.
                    It's probably too late for HMRC to do anything about that, but that process sets the values for CGT calculations later on, so it's another complication.

                    Part of the purpose of Probate is to provide the background information that you need now, and to report to HMRC the end of your parent's CGT liability.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


                      There was no estate as such, property jointly owned - they were both retired at time of purchase living on small pensions, hence I bought with them so they could stay in the home they'd been renting from council from early 1950s to March 1982 at time of purchase. And I paid for the initial improvements to make life more comfortable for them, I was the youngest of children with no ties/mortgage at the time so could afford to buy with them. 10 yr mortgage only. Parent 1 had savings in 100s only. Parent 2 had more savings but these went to pay care home fees. The extract below sums up the situation. We didn't need probate so that Parent 1's minimal savings could be transferred to Parent 2's account. Parent 2 - all their pension etc. went towards care home fees, died intestate, no probate. Check if probate is needed

                      Contact the financial organisations the person who died used (for example, their bank and mortgage company) to find out if you’ll need probate to get access to their assets. Every organisation has its own rules.

                      You may not need probate if the person who died:
                      • had jointly owned land, property, shares or money - these will automatically pass to the surviving owners
                      • only had savings


                        Yes this would be the case if it was jointly owned (not as tenants in common). The situation would be that at death 1/6th of the value of the whole would have been deemed to pass to you (for CGT purposes), as the survivors would share the whole.

                        So for the 3 periods you would be taken to own

                        33.333% 50% 100%


                          Even if probate wasn't mandatory, it would probably have been useful.
                          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


                            Hi Andrew
                            First of all I've got an initial appointment to speak to an accountant on Friday!

                            Can I just check where you write ' death 1/6th of the value of the whole would have been deemed to pass to you for CGT purposes as the survivors would share the whole'.

                            Does this mean 1/6th of the value of the whole as in the sale price of the house this year, i.e £80k?
                            1/6 of £80k is £13,333k is therefore the CGT figure?
                            Of which I can deduct the solicitor fees etc. and cost of any improvements to facilitate the rental?
                            If so then I don't owe any CGT when I take into account the £12,500 allowance which was my original assessment prior to the changes in 2020 and as I haven't been required to complete a SA last year or this year and only income is from employment then there is no need for me to report the sale as no CGT to pay?
                            Or have I got this completely wrong and need to go for a lie down or a stiff drink? And I need to do some calculations for the three periods referenced.

                            Thank you.


                              I think Andrew is correct .

                              You start with 1/3 interest ( in 1982 valued at £6500 ? ) plus 1/6 interest from parent1 ( valued at £20K ?) plus 1/2 interest from parent 2 ( valued at £60K ? ). This probably takes your total entry cost to around £40K.

                              Your total capital gain is roughly £80K.- £40K = £40K which is apportioned between 1982-2007 ( self use period .) and 2007-2021 ( rental period..

                              You can claim exemption on 26 years for self use period . So liable to pay tax on 13 years gain during rental period = £14K .

                              After deducting the capital gains personal allowance of £12,300, you probably pay 18% tax on £1,700.


                                Originally posted by reluctantlandlord1976 View Post
                                as I haven't been required to complete a SA last year or this year and only income is from employment then there is no need for me to report the sale as no CGT to pay?
                                You have to make the return to tell HMRC there is no tax to pay, if that's the case.
                                There is no option not to tell HMRC.

                                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


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