Hello,
I am trying work through my options for an inheritance property that I propose renovate, then rent out, and at a later point, sell.
I am trying to ensure that I have understood potential IHT + CGT consequences.
If I inherit the residential property worth say (for simplicity) £525k.
I agree to pay HMRC IHT on the estate by instalments, thereby allowing me time to renovate the property (instead of selling it straightaway) at say c. £100k, and thereafter renting it out over 5 years, before selling it (for simplicity) at £825k, are the below IHT and CGT analysis correct:
Inheritance
£000
525 Value on inheritance:
(325) IHT exemption
200 Value of estate for IHT
(80) IHT liability (payable in 10 instalments of£8K+HMCR interest)
£000 following sale
825 Value at sale
300 Gain following Inheritance
(135) CGT liability on sale (assuming I'm 40% income tax payer)
(40) Remaining IHT (assuming holding and renting the property for 5 years + paying annual IHT instalments of £8K per year)
Another question, would it be possible to raise a mortgage on an inherited property as described above to pay for the IHT instalments and renovation costs, assuming its intended to be a rental property? Would the mortgage on the property at the point of sale be deductible from the capital gain chargeable to CGT?
Thanks
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