Any lawyers/accountants know about inheritance and capital gains issues?

[ameliagrey]

Can anyone help? Recent conversation with my elderly parents has brought up this topic again.

My brother and i stand to inherit our parent's house which falls considerably below the threshhold for Inheritance tax.

However, it has a large plot- 1 acre- which we could probably build on. Local estate agents have always expressed an interest and suggest maybe 10 properties.

I have been advised not to apply for planning permission until we inherit the house. What happens next if we sell the land, re taxes? Am I liable for capital gains tax?

A provisional estimate of value could be £500K so if half goes to my brother and then we are taxed @ 40%, not a lot left.

Anyone?

[minipie]

Do you own another property?

[LIZS]

I think your CGT liability is assessed between the value at the time you inherit and the price you sell for. However you/bro can each offset an annual allowances against the gain and possibly some other costs. It is a very specialist area though and criteria can differ if, for example, you live in it as your main residence.

[ameliagrey]

yes we both own other proeprties.

I think we could save tax if one of us lived in it for a while after we inherited it.

[pippala]

Your parents could take out life insurance to pay out on the 2nd death. Leaving the insurance payout to you and your brother. This is not subject to IHT and will cover the CGT due on the land.
We took out insurance a few months ago to pay for our kids IHT when the time comes. Paying £15 per month to cover £700,000 IHT on todays money. However we are in our 40's so I expect the premiums will be much higher for your parents as they will be paying the policy for a much shorter term.
We were advised to do this when we drew up our wills as our kids will have a large IHT burden.
We also thought about transferring property to them now with a life stake in it for us but that would still attract CGT for them on our deaths.
Solicitor thought insurance the best way to cover their liability.
Hope this helps.

[ChasingSquirrels]

when you inherit you have a base CGT cost of the market value at the point of death (assessed as part of probate and used to calculate the total value of the estate and assess IHT).

So if you then sell on at that market value you have no CGT liability, if you sell later and the value has increased then you will have a CGT liability on the increase, less your annual CGT allowance.

The current rate of CGT is 18%/28% depending on whether you are a basic or higher rate tax payer.

[mranchovy]

See an accountant who specialises in residential development as there are many aspects to this. I know a good one .