Inheritance Tax and Capital Gains Tax

[supadeja]

Was told to put this in this section - Hope someone can make sense for her (in words she will understand) Thanks

OK my sister emailed me this - I was hoping you could answer her worries to put her mind at rest...

Our Mother wants to leave her whole house to her in her will (We are ok with this - the other siblings)
She is underneath the IHT bracket her house worth 175thou

She is worried about Capital gains tax or whatever and how that would affect her

She is currently in rented accomodation - If her housing assn gave the right to buy (they are thinking of it) and she sold mums house to buy the home she is currenlty in how would that affect her tax wise etc (She is on benefits) what tax would she be liable for

If she moved into my mothers house then decided she wanted to sell it and move elsewhere would tax affect her then? Or does she hafta live there for a certain amount of years to be free of this worry?

She has Multiple Sclerosis and is unwell as it is and this worry is making her very ill, she is worried she will end up being made homeless by tax and stuff and cannot see past the worries to this lovely gift left to her by our mother

I am sure if you could answer these worries for her she would be able to breathe a sigh of relief and leave the rest of us in peace

many Thanks I truly pray you are able to help and calm her down

[Didwot]

1. There is no Capital Ggains Tax payable on any increase in value in your home (called your principal privatre residence in tax speak.
2. When someone dies there is no Capital Gains Tax payable on the increase in value of their assets up to the date of their death. This is to prevent two lots of tax (CGT & IHT) being payable.
3.IF your sister inherits the house and lives in it then it will become her principal private residence.
That gives you three reasons why you can all sleep well tonight.

[supadeja]

If she decided to sell it to fund the purchase of the house she is renting now - What happens then? Thanks so very much :-D

[Didwot]

The only person who can sell your mothers house whilst your mother is still alive is your m other, and I assume she has nno intention of doing that, (and living on the street as a result) Of course if she did, and were to give the proceeds of sale to your sister, then that would be gift potnetially laible to IHT if youur mother were to die within 7 years, but as here total estae is below the IHT threshold then that tax will still not be payable. On the other hand if you are referring to your sister selling the house on your mother's death, then there will be no CGT to pay because of reason 2 in my first answer, unless the house is held as an investment for some while and appreciates in value, in which case a potnetial CGT liabililty will arise on any increase in value following your mother's death. Your sisters home will be her principal private residence and CGT exempt.