Has anyone experience of buying a house that has been inherited by a family member?

[disney332]

Originally Posted by Claudette

It doesn’t matter if they value it for more than you are expecting. You want to borrow £150k, that is not going to change because the house is valued for more than you think.



The CGT will be payable more or less straight away. It will be levied as a % of the profit which will be calculated based upon the market value at the time of the sale to you, not what you pay them. They can deduct capital expenditure from the profit and everyone has an annual CGT allowance, a bit like the personal allowance for income tax.

There would be no immediate inheritance tax impact. A gift becomes relevant for IHT purposes if the gift giver should pass away with seven years of making the gift. Of course there are IHT allowances and the estate might not be over the IHT threshold anyway, but the sums need to be done considering the gift.

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If the house is valued at £350k and its gifted by one parent only (ie not jointly owned), would £25k (ie the bit over the individual IHT allce) be immediately assessed at lifetime rates of IHT (20% i think) ?

Disney332

[arl71]

I'd definitely look at taking specialist advice. If your parents sell to you at less than market value and subsequently need residential care this could be viewed as a disposal of assets to avoid care home fees and could get messy.

[hvasey]

Deprivation of assets could also be an issue should one or both of your parents need care and weren’t able to self fund.
CGT is payable on the difference between the value of the property when inherited and the point of sale to you.
Say it was worth £200k on inheritance and is worth £350k now, CGT could be around £35k.

[Claudette]

Originally Posted by disney332

If the house is valued at £350k and its gifted by one parent only (ie not jointly owned), would £25k (ie the bit over the individual IHT allce) be immediately assessed at lifetime rates of IHT (20% i think) ?

Disney332

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The gift is either a potentially exempt transfer (PET) or a chargeable lifetime transfer (CLT). If it were a CLT then the answer to your question would be yes. However this looks like a PET to me, in which case no. A CLT usually involves transactions with trusts or companies (rather than individuals).

[excitedbunny79]

Thanks for all your advice, I really appreciate it.

It is a interest only mortgage, and either way the house will need to be sold in 2 years as they don't have the money to be able to pay it back. My dad is 75 and my Mom is 70 so I'm not sure their current mortgage company will extend the term again, but I may be wrong.

It seems like a a minefield and its so difficult to find trustworthy advisors. I certainly don't want them to be out of pocket with paying tax if I buy it, so I'll need to think about that as well.

I'm an only child so I don't have to think about Siblings.

I'm not sure whether this will make any difference to the CGT but when my parents inherited it, it was a Dorma bungalow and was valued at around £250k my grandad's dream was always to make it into a house and that's what my Dad wanted to do with it and is why they took out the £150k mortgage. So in today's market, they've actually technically lost money renovating it - does this make any difference?

[123]

They can sell you the house for 2p if they want to.

Its the taxation that is the issue here.

For stamp duty you would need to get it professionally valued and pay stamp duty on the deemed value not the price you pay.

Equally for then Capital Gains Tax will be levied on the gain between the property value when inherited and the value when sold.

[parisdisneyfan]

Originally Posted by excitedbunny79

Thanks for all your advice, I really appreciate it.

It is a interest only mortgage, and either way the house will need to be sold in 2 years as they don't have the money to be able to pay it back. My dad is 75 and my Mom is 70 so I'm not sure their current mortgage company will extend the term again, but I may be wrong.

It seems like a a minefield and its so difficult to find trustworthy advisors. I certainly don't want them to be out of pocket with paying tax if I buy it, so I'll need to think about that as well.

I'm an only child so I don't have to think about Siblings.

I'm not sure whether this will make any difference to the CGT but when my parents inherited it, it was a Dorma bungalow and was valued at around £250k my grandad's dream was always to make it into a house and that's what my Dad wanted to do with it and is why they took out the £150k mortgage. So in today's market, they've actually technically lost money renovating it - does this make any difference?

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Not sure on houses but does on shares that my Dh was given so another thing to look into - good luck🥴. If you are a first time buyer you should be ok for stamp duty - the government has a website you can check by entering the figures!

[Claudette]

Originally Posted by excitedbunny79

I'm not sure whether this will make any difference to the CGT but when my parents inherited it, it was a Dorma bungalow and was valued at around £250k my grandad's dream was always to make it into a house and that's what my Dad wanted to do with it and is why they took out the £150k mortgage. So in today's market, they've actually technically lost money renovating it - does this make any difference?

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Yes it makes a difference, tax is only levied on gains / income, not losses.

[munmun]

Originally Posted by Claudette

Yes it makes a difference, tax is only levied on gains / income, not losses.

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I hope they have as much information, bills, receipts, costs etc that will help the collation of capital expenditure.

[vhm672]

Originally Posted by Claudette

Yes it makes a difference, tax is only levied on gains / income, not losses.

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There is a capital gains calculator on gov.uk. It should give you the figures which support this and what deductions can be made to negate CGT