I have recently bought my brother’s 50% share of our deceased parents house so I now own the house outright and will rent it out. My question is should I decide to sell it if the letting doesn’t work out do I pay CGT on my half or my brothers half that I bought as well as on the appreciation in the value of the house ?
Hopefully I’ve put this in a way that is understandable.
Many thanks from a “first- timer”.
I think you will have to pay CGT on both halves, from the time you took possession of that half.
I hasten to add I am no expert, but this is what I think happens.
Thanks for your reply, I have had it confirmed that CGT is only payable on the appreciation of the house value from the day it is let up until the day it’s sold. The fact that I have bought half and inherited half doesn’t affect anything. Just hope that I have been advised correctly. Thanks anyway.
The CGT cost of the half you inherited will be the probate value. The CGT cost of the half you bought from your brother should be the amount you paid, assuming that was market value. When you sell, your gain will be proceeds less sale costs, less any costs of buying from your brother, less the costs for both halves of the property.
Just to clarify, the value at the time you first rented it out is not, ever, relevant. Even if you’ve lived in it, you time apportion the gain to find the amount eligible for private residence relief rather than calculating it from the value when you first let.
Any chance you can do an example in figures so I can understand this a bit better. Keeping it simple let’s say the house is worth 100k and I bought my brother’s half for 50k. Thanks.
If the probate value of your original half was, say £40k, and you bought your brother’s half for market value of £50k and then sold it for £100k, your gain would be £10k (100-40-50) less any legal fees.
Thanks for the breakdown Cath, I understand now, numbers I understand but the jargon I do struggle with.