Valuation of property for Inheritance Tax purposes

[peskykitten]

If my late mums property has been today valued at �395,000 in its current state, and this is what is declared as the value for inheritance tax purposes, what happens if it is sold at a later date for a much greater sum (ie the house is currently in the process of renovation and extension and so will be worth around �500,000 if I decide to carry on the building works). The estate agent told me today that if all building works were to be carried out I could in effect split the property into 2 seperate houses and sell each for around �250,000. What do I do regards to stating a value of the property for inheritance tax ?!?!?!

Any advice appreciated x

[yogasun]

peskykitten I'm not sure about this but would imagine that it's the value of the property at the time of your mum's death.

After all property would (generally - tho not at the moment) go up in value whether you renovate it or not, so you have to have a point to value it. It's as it is at the time of your mum's death in her total estate value. Your solicitor will put you right.

[peskykitten]

Yes, that's what I am thinking. All the tax guides I have read state it is the value of the property at the time of death but I just have a feeling that, in this case, there is going to be a catch somewhere along the line! Will speak to my solicitor.

Thanks for the quick response.

[themas]

For IHT, it is the value at the date of death. If it is later sold for more, then the difference attracts Capital Gains Tax (at, I believe, 40% apart from the annual allowance of around �9K). However, if you live in it for some time before selling it then the CGT may be reduced. Look at the detailed info on CGT on HMRC site.