40% Capital Gains Tax On Second Homes

[Gone baby gone]

The house next door to us was inhabited by an old lady who shuffled off this mortal coil about 18 months ago. It was subsequently inherited jointly by her niece and nephew, both in their late-40s, early 50s. The house was in a poor state when the old dear cashed her chips in, needing new windows, various stonework and a complete decorative overhaul.

Since they inherited the place (worth around 120K in it's current state), they have done nothing, except empty some of her more valuable possessions and tidy the garden of weeds - usually after we badger them to do this.

Today, the whole of both families involved have turned up and started to empty the rest of the junk from the house. Two of them are painting the woodwork as fast as possible and the other 8 are busying themselves around the garden and shifting boxes out into their cars. On my way back from the paper shop, I waved a cheery hello and commended them on their hive of activity. "We're putting it on the market" was the statement from a breathless 50 yr old as he emerged from the garden carrying two cardboard boxes.

When my father-in-law - a serial DIYer + flipper - enquired about it 3 months ago, the part-owner said they had no intentions of selling. Suddenly, less than a week into the new coalition, it's time to get rid.

Nothing to do with CGT on second homes going to 40% though

Edited May 16, 2010 by redalert

[Cicero]

The house next door to us was inhabited by an old lady who shuffled off this mortal coil about 18 months ago. It was subsequently inherited jointly by her niece and nephew, both in their late-40s, early 50s. The house was in a poor state when the old dear cashed her chips in, needing new windows, various stonework and a complete decorative overhaul.

Since they inherited the place (worth around 120K in it's current state), they have done nothing, except empty some of her more valuable possessions and tidy the garden of weeds - usually after we badger them to do this.

Today, the whole of both families involved have turned up and started to empty the rest of the junk from the house. Two of them are painting the woodwork as fast as possible and the other 8 are busying themselves around the garden and shifting boxes out into their cars. On my way back from the paper shop, I waved a cheery hello and commended them on their hive of activity. "We're putting it on the market" was the statement from a breathless 50 yr old as he emerged from the garden carrying two cardboard boxes.

When my father-in-law - a serial DIYer + flipper - enquired about it 3 months ago, the part-owner said they had no intentions of selling. Suddenly, less than a week into the new coalition, it's time to get rid.

Nothing to do with CGT on second homes going to 40% though

Ah yes, so much for the old "property is my pension" chestnut. The impression one gets is that the inheritees are somewhat locust like.

[Confusion of VIs]

The house next door to us was inhabited by an old lady who shuffled off this mortal coil about 18 months ago. It was subsequently inherited jointly by her niece and nephew, both in their late-40s, early 50s. The house was in a poor state when the old dear cashed her chips in, needing new windows, various stonework and a complete decorative overhaul.

Since they inherited the place (worth around 120K in it's current state), they have done nothing, except empty some of her more valuable possessions and tidy the garden of weeds - usually after we badger them to do this.

Today, the whole of both families involved have turned up and started to empty the rest of the junk from the house. Two of them are painting the woodwork as fast as possible and the other 8 are busying themselves around the garden and shifting boxes out into their cars. On my way back from the paper shop, I waved a cheery hello and commended them on their hive of activity. "We're putting it on the market" was the statement from a breathless 50 yr old as he emerged from the garden carrying two cardboard boxes.

When my father-in-law - a serial DIYer + flipper - enquired about it 3 months ago, the part-owner said they had no intentions of selling. Suddenly, less than a week into the new coalition, it's time to get rid.

Nothing to do with CGT on second homes going to 40% though

Hard to see your logic here. The tax changes won't affect them unless prices suddenly shoot up, in which case they would still be better off holding on.

[The Masked Tulip]

I would ask them why they are selling now - be blunt about it, straight to the point and you may get the real info.

[pyracantha]

The impression one gets is that the inheritees are somewhat locust like.

Hardly, the "old dear" died 18 months prior and settling estates can take some time when families (and others) dispute the will etc.

With 40% CGT coming in, wouldn't you try to shift it quickly? Maybe the family have started reading this site and can see the shitstorm coming.

Edited May 16, 2010 by pyracantha

[Frank Hovis]

There are a few good news stories like this knocking about now. Could 40% CGT on second homes be "the one".

[Mrs Bear]

The house next door to us was inhabited by an old lady who shuffled off this mortal coil about 18 months ago. It was subsequently inherited jointly by her niece and nephew, both in their late-40s, early 50s. The house was in a poor state when the old dear cashed her chips in, needing new windows, various stonework and a complete decorative overhaul.

Since they inherited the place (worth around 120K in it's current state), they have done nothing, except empty some of her more valuable possessions and tidy the garden of weeds - usually after we badger them to do this.

Today, the whole of both families involved have turned up and started to empty the rest of the junk from the house. Two of them are painting the woodwork as fast as possible and the other 8 are busying themselves around the garden and shifting boxes out into their cars. On my way back from the paper shop, I waved a cheery hello and commended them on their hive of activity. "We're putting it on the market" was the statement from a breathless 50 yr old as he emerged from the garden carrying two cardboard boxes.

When my father-in-law - a serial DIYer + flipper - enquired about it 3 months ago, the part-owner said they had no intentions of selling. Suddenly, less than a week into the new coalition, it's time to get rid.

Nothing to do with CGT on second homes going to 40% though

Are you sure they haven't only recently got probate and are thus entitled to sell?

Speaking from experience, it can take ages, especially the way the banks (yes, that's you Barclays ) can mess you about forever with the paperwork, losing everything over and over + sheer shambolic incompetence.

[tpbeta]

I was under the impression that CGT would only be payable if the place has increased in value since they inherited it - which it may have done a bit but not much.

Otherwise they would just pay inheritance tax in this scenario which is 40% on anything above £325,000.

It's BTL landlords who would be clobbered by an increase in CGT - not inheritors of estates.

[Gone baby gone]

Are you sure they haven't only recently got probate and are thus entitled to sell?

Speaking from experience, it can take ages, especially the way the banks (yes, that's you Barclays ) can mess you about forever with the paperwork, losing everything over and over + sheer shambolic incompetence.

No, it took them 6 months to get through probate. For those 6 months they did nothing (and I mean nothing) to the house, when probate was granted, they got a few trees in the back garden cut down and removed the first load of stuff (the things they wanted to keep / sell).

[Gone baby gone]

I was under the impression that CGT would only be payable if the place has increased in value since they inherited it - which it may have done a bit but not much.

Otherwise they would just pay inheritance tax in this scenario which is 40% on anything above £325,000.

The house wouldn't have been subject to inheritance tax, value is too low. The first time I spoke to the male inheritor, he assured me that property was going to rise in value. It could be that they've only just realised this isn't going to happen, but the timing seems a bit coincidental, especially since they had no plans to sell 3 months ago.

[tpbeta]

The house wouldn't have been subject to inheritance tax, value is too low.

It's the value of the estate that matters, not the house. The little old lady might have had a gold bar under her bed.

[Phil S]

I was under the impression that CGT would only be payable if the place has increased in value since they inherited it - which it may have done a bit but not much.

Otherwise they would just pay inheritance tax in this scenario which is 40% on anything above £325,000.

It's BTL landlords who would be clobbered by an increase in CGT - not inheritors of estates.

Correct. Say the house was worth £100k when inherited and £120k now, therefore the gain is only £20k. Split amongst just two people means no CGT to pay.

Edited May 16, 2010 by Phil S

[hirop]

A beautiful anecdotal, more of this please.

[Pent Up]

it doesn't sound like CGT has anything to do with it but does show that sheeple are starting to realise it's now or never to sell!

[ronpember]

Nothing to do with CGT on second homes going to 40% though

As you say - nothing to do with CGT - your post makes you look like a right ignoramus!!

[Gone baby gone]

As you say - nothing to do with CGT - your post makes you look like a right ignoramus!!

Thanks Ron. You strike me as a bit of a twit, so any slagging from you I take as a compliment

Something has startled them into life, and regardless of whether it's the threat of 40% on any future gains they might make, or the chances of a property market slump resuming, they are now getting ready to sell.

Guess what... a property half way down the street that has also been in need of TLC for years now has 2 people clearing the garden and making repairs. First time I've actually seen a car parked in the drive.

[The Masked Tulip]

Thanks Ron. You strike me as a bit of a twit, so any slagging from you I take as a compliment

Something has startled them into life, and regardless of whether it's the threat of 40% on any future gains they might make, or the chances of a property market slump resuming, they are now getting ready to sell.

Guess what... a property half way down the street that has also been in need of TLC for years now has 2 people clearing the garden and making repairs. First time I've actually seen a car parked in the drive.

I asked several EAs today if the CGT changes had brought any sellers in in a panic - all the EAs had no idea about any CGT change!

[Rozza]

I asked several EAs today if the CGT changes had brought any sellers in in a panic - all the EAs had no idea about any CGT change!

Most EA's know nothing about property so why would they know about the costs, most of them have only worked through the "show up and it sells itself, property only ever goes up" years.

So no wonder they are clueless

[TeddyBear]

CGT would only become relevant if the house sold for more than the probate value so unlikely to be relevant here.

I don't think 40% CGT will do much, after all, CGT was at 40% for years until the 18% level was brought in by our Nulabour friends, IMO probably to allow them to offload their second, tax payer funded homes at better terms.

People won't run scared of the 40% IMO until it becomes much more difficult to say that somewhere is your principal residence and thus avoid CGT, people can still easily switch between nominating homes as their PPR.

[Kazuya]

Just to add to the anecdote.

Someone I know is selling 2 properties. One purchased in 2003 (BTL) and the other one a few months ago to renovate and rent as it was a depressed sale and purchased for 2002 price with cash

He doesn't have "time" to renovate the new purchase (which he wants to sell at a 2006 price) and is putting both houses on sale next week.

Someone in the know has told me the second property is unmortgageable hence the cheap sale price. Seems people are still in property flipping lala land.

The dash for the exit has begun...or not...

Edited May 24, 2010 by Kazuya

[Bobajobbob]

If the situation was anything like my own there was probably a realisation amongst those set to inherit that multiple ownership of a house is not really viable. Sure you can rent it out and receive a meagre income but split multiple ways and deciding who is responsible for upkeep etc is a PITA. Even in a rising housing market easier and simply to sell, distribute and let each party choose what to do with the realised cash.

[munro]

Most EA's know nothing about property so why would they know about the costs, most of them have only worked through the "show up and it sells itself, property only ever goes up" years.

So no wonder they are clueless

If you want to sell something to somebody, allowing the other person to feel superior can be a very effective strategy. Of course some of them are clueless but there's plenty of others happy to stroke the egos of potential buyers and rip them off unmercifully. Agents lie and dissemble, believe it or not.

[non frog]

Most EA's know nothing about property ....

I think that's deeply and profoundly unfair. The last estate agent I had dealings with was able to inform me which was the bathroom, the toilet and the kitchen without looking at her notes.

[Frank Hovis]

I think that's deeply and profoundly unfair. The last estate agent I had dealings with was able to inform me which was the bathroom, the toilet and the kitchen without looking at her notes.

In which case you should do the decent thing and nominate her:

http://estateagentoftheyear.com/index.html