how does capital gains work for inherited property Post Reply

[love a mohito]

Two years ago I inherited a property. I have invested quite a lot of money doing it up, it hadn't been touched in forever and now that it has been renovated I am wondering whether to sell the home that I currently live in and move into the inherited one or sell the inherited one that I have done up. It will all come down to the amount capital gains tax that will be due on each property.
Could anyone tell me, will I pay capital gains on the difference in price between what the value of the property when I inherited it and the post investment valuation or will I be able to deduct the amount that I have invested doing it up and just pay capital gains on the balance. I have had lots of pub advice but would love someone who actually knows to tell me if I can be so cheeky.
So complicated! Or maybe that's just me:-(

[chorister]

I think (emphasise think, I'm not sure) that if you sell the current house and move into the new one then the sale will be exempt, assuming it has been your principal private residence.  Then after some period (I'm not sure how long) the new one would qualify as your principal private residence and you could sell it tax free too.  If you sell the second one now then CGT will be payable on the uplift since you inherited it.  I think the amounts spent on renovations would be deductible.

It is absolutely definitively worth getting proper tax advice.

And a final thought - is minimising tax really the most important thing?  If we all did it then who would pay for 'Our NHS' and the other services we want so much, and which we regularly complain are starved of funds.

[Keinpulpit]

If you inherited the property as a direct descendant (child, maybe grandchild) you should have reduced inheritance tax/higher threshold. I don’t think this applies to any other relationship (niece, nephew, cousin)

The property’s value is calculated at the date of death of owner so collect estate agent valuations, any offers to buy and comparable land registry information to support this.

Also collect any proof of payments for refurbishment before/after photos, but just hold these unless required as you want to keep the claim simple.

If you sell your current home you should be exempt. If ‘new’ home then becomes primary residence it will also be exempt after a period of time.

Sounds like a good plan, especially if you really like the inherited property and could live in it happily. It’s not often the tax system works for you. I’m sure you pay plenty of tax elsewhere.

Definitely talk to a solicitor. It’s not complicated so you don’t need get a fancy London firm.