ChatterBank0 min ago
Probate and Inheritance Tax
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My partner has recently inherited a house with the probate value of �260,000. He has put it on the market for �310,000 which is obviously over the probate value and inhertiance tax threshold. If he gets �310,000 for it will he have to pay tax on the extra �25,000?
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For more on marking an answer as the "Best Answer", please visit our FAQ.If he does not already have a house in his own name he can register it in his name and it is free of Capital Gains Tax. If he already has a house then he will be liable to Capital Gains on the extra �50,000. Not sure where you get the �25,000 from ? �310,000 - �260,000 = �50,000. The first �8,800 of gains is free from tax this tax year and this allowance goes up to �9,200 on April 6th 2007. If you are married you can adjust the will so that you inherit the property jointly and you both get to use your CGT allowance. My wife and I did this successfully two years ago. Check with the solicitor that did the probate.
Sorry. I should have made my answer clearer. You do not pay IHT and CGT on a deceased estate. The probate value is below the the IHT threshold of �285,000 therefore no Inheritance Tax . If it is subsequently sold for more than the IHT level it is charged under the CGT regime which is charged at a slightly different rate. Inheritance tax is a flat 40% but CGT is your marginal rate up to 40% and you get the annual CGT allowance of �8,800 ( 2006-07 ) �9,200 ( 2007-08 ) so it is cheaper than paying IHT. Complicated ? You bet it is! See the solicitor or accountant or IFA. The Revenue are very helpful. Also remember to deduct all the selling costs!!!!