CGT on rented properties
Discussion
Unfortunately my mother passed away recently and I inherited her house. (15 years ago I lived there with my parents) I am just in the process of filling in the probate application. (the estate is less than the CGT threshold)
Due to the fact it was my family home I don't particularly want to sell it, so I have decided to rent out the property. Prior to her passing away the house underwent extensive refurbishment, new bathroom, down stairs toilet fitted, new kitchen, rewired, new central heating,new fireplace and fire, damp proofing, fire and smoke alarms, re-plastered, new woodwork, new carpets, ......... she enjoyed 3 weeks of the refurb before passing away.
The only thing remaining are the bedrooms and the gardens to sort out, and basically it will be completely re-furbished. Its partially furnished with 2 week old furnishings but these can be sold or used at my property.
There is no mortgage on the property and a reasonable rent would be in the £500-£600 per month region. I have various people wanting to rent the property, (I work at a large company where people get posted to the UK for various periods of time 1-5 years)
The question I have is what would be the CGT on the property if I wanted to sell it in say 5, 10, 20, years time. I know the calculation if the property was originally my own home that I lived it but because I have inherited the property are there any differences ?
Also if I decided to give the house to my son in 20 years time and he lives there then decides to sell it to move to a larger property would CGT be required. (providing I didn't die with 7 years)
Due to the fact it was my family home I don't particularly want to sell it, so I have decided to rent out the property. Prior to her passing away the house underwent extensive refurbishment, new bathroom, down stairs toilet fitted, new kitchen, rewired, new central heating,new fireplace and fire, damp proofing, fire and smoke alarms, re-plastered, new woodwork, new carpets, ......... she enjoyed 3 weeks of the refurb before passing away.
The only thing remaining are the bedrooms and the gardens to sort out, and basically it will be completely re-furbished. Its partially furnished with 2 week old furnishings but these can be sold or used at my property.
There is no mortgage on the property and a reasonable rent would be in the £500-£600 per month region. I have various people wanting to rent the property, (I work at a large company where people get posted to the UK for various periods of time 1-5 years)
The question I have is what would be the CGT on the property if I wanted to sell it in say 5, 10, 20, years time. I know the calculation if the property was originally my own home that I lived it but because I have inherited the property are there any differences ?
Also if I decided to give the house to my son in 20 years time and he lives there then decides to sell it to move to a larger property would CGT be required. (providing I didn't die with 7 years)
First of all it's impossible to know what the rules will be in 15 years... especially as CGT and IHT change a lot. I don't know for sure about the amount of CGT if you sold it, I'd expect it'd be due on the profit compared to the market value when you inherited it. However I am fairly sure that gifting it to your son will cause CGT immediately to be due at market value rates in exactly the same way (ignoring the IHT implications). A gift is treated as if it were a regular transaction. So probably also stamp duty.
Most tax advisers will only give you advice based on current tax rules. We don't have crystal balls.
You will have inherited the property at the Market Value at the date of transfer of owneship to you. That Market Value will be taken as the base cost for future Capital Gains Tax calculations.
The fact that you lived there (presumably as a child) will not count for the normal "Main Residence Exemption" calculation.
You will have inherited the property at the Market Value at the date of transfer of owneship to you. That Market Value will be taken as the base cost for future Capital Gains Tax calculations.
The fact that you lived there (presumably as a child) will not count for the normal "Main Residence Exemption" calculation.
A gift to your son will be classed as a disposal just as if you sold it on the open market, and therefore CGT will be payable under the rules at the time. Also, he would pay stamp duty and have to be seen to buy it at a true market value rather than a token amount.
Only gifts between spouses are exempt from CGT.
The 7 year rule is relative to IHT only.
It matters not that you lived in the property as it was never yours when you lived there.
The acquisition value is the amount you declared on the probate statement (which by law cannot be undervalued).
HTH
Only gifts between spouses are exempt from CGT.
The 7 year rule is relative to IHT only.
It matters not that you lived in the property as it was never yours when you lived there.
The acquisition value is the amount you declared on the probate statement (which by law cannot be undervalued).
HTH
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