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Where Taxpayers and Advisers Meet

Share ownership /shared Inheritance

vladthestupid
Posts:2
Joined:Thu May 12, 2022 3:45 pm
Share ownership /shared Inheritance

Postby vladthestupid » Thu May 12, 2022 4:42 pm

Hi,
I need to work out a rough calculation of cgt liability for my wife, I am not trying to work out to the penny for a return but just checking that our assumption is correct before we proceed with a sale, we are not looking at any how do we avoid etc we just want to know what we roughly owe.

Background.
My wife's mother gave her 1/2 share of the family home to her 3 children in equal shares of 1/6 each in January 2017. The other half being in my father in laws name until his death march 2021 when the his will passed the the estate to his wife in trust for her enjoyment whilst alive and then on to the 3 siblings last month when the mother died.

My father in law was in a care home since a stroke in 2016 and my in law apparently did not want her half given to him ...why she did not just change her will is a beyond me but hey ho I am new to this....I would say they are from Northern ireland so perhaps I shouldn't be surprised, what the daily mail said is a taken as gospel.

So upshot.. 3 shares now exists, 1/2 of that share 1/6 of the house gained by transfer and 1/6 gained by inheritance.

The property is in Northern Ireland, its market value is today is £210,000 and at transfer it was valued £172,000

My wife is a standard rate tax payer and has not used any CGT allowance.

Our assumption is that :

Her share is worth 70K (less sales fee's but we will assume there are none for planning)

Neither parents had any other assets at time of death, care costs had eaten them up.

35k was received by inheritance and there is no further liability.

35k is subject to cgt given that she gained 1/6 share from a transfer and gained all from the gift in 2017.

Her tax liability would roughly be 35k - 10% shared ownership discount - 12.3k CGT tax allowance = 19.2k subject to tax of 18% so therefore a CGT bill of £3450 would be roughly what she should expect.

Any thoughts gratefully received...

AGoodman
Posts:1416
Joined:Fri May 16, 2014 3:47 pm

Re: Share ownership /shared Inheritance

Postby AGoodman » Fri May 13, 2022 10:39 am

The overall base cost of the property would be 1/2 of 172k (86k) plus 1/2 of 210k (105k) so £191k.

Overall gain, if you sell at £210k, is £19k minus costs of sale.

Divided by three, that would be £6,300, which is well within your wife's annual exemption of £12,300. Therefore no tax to pay.

Gifts take place at market value, hence your mistake was to treat the gifted 1/6 as pure gain, when you actually take the 2017 value as the base (acquisition) cost.

vladthestupid
Posts:2
Joined:Thu May 12, 2022 3:45 pm

Re: Share ownership /shared Inheritance

Postby vladthestupid » Fri May 13, 2022 1:54 pm

Thank you very much.


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