Dealing with Capital Gains Tax calculations after a family bereavement can feel overwhelming, particularly where property has been inherited and later sold. Many people are unsure which costs can be taken into account, especially where improvement works were carried out some time ago or where planning permission was unclear or has since expired.
This guidance explains, in plain English, how Capital Gains Tax (CGT) generally applies when someone inherits a share of a family home, and what types of property costs may be deductible when calculating any gain under UK tax rules.
Understanding the issue or context
When a person inherits a share of a property, such as 50 per cent of a family home, CGT does not usually arise at the point of inheritance. Instead, CGT may become relevant if that share of the property is later sold or transferred.
At that stage, the person dealing with the tax return must calculate any increase in value between the date of inheritance and the date of sale. This process often raises questions about what costs can be deducted to reduce the taxable gain.
Uncertainty commonly arises where money has been spent on improving the property, particularly if the work was carried out years ago or where planning permission was not current or formally in place.
The legal rules or framework
For CGT purposes, UK tax rules distinguish between routine maintenance and capital improvements.
General repairs and maintenance, such as repainting or fixing wear and tear, are not usually deductible. However, costs incurred to improve or enhance the value of the property may be allowable deductions.
Improvement costs can typically include works that add to the property’s value, extend its life, or adapt it for a different use. The key consideration is whether the work created an enduring improvement rather than simply restoring the property to its previous condition.
The position is not automatically affected by whether planning permission was later allowed to lapse or was not required at the time. What matters is whether the expenditure genuinely improved the property and whether it can be properly evidenced.
Because CGT rules can be technical, understanding how HMRC is likely to view specific costs is important before submitting calculations.
Practical steps to take
If you are preparing CGT calculations for an inherited share of a property, the following steps can help clarify your position.
First, confirm the property’s value at the date of inheritance. This figure forms the base cost for CGT purposes.
Second, identify any improvement or enhancement works carried out after inheritance. Focus on works that added value or changed the property, rather than routine upkeep.
Third, gather evidence of the costs incurred. Invoices, receipts, bank statements, and contractor records can all be relevant.
Fourth, review whether the works were improvements rather than repairs. If in doubt, professional guidance can help you assess how the costs are likely to be treated.
Finally, consider whether fixed-fee legal or tax input would provide reassurance before submitting the CGT return, particularly where the figures are significant.
Common pitfalls to avoid
A common mistake is assuming that all property-related costs are deductible. Routine maintenance is generally excluded.
Another pitfall is failing to keep or locate evidence of historic works. Without documentation, HMRC may challenge the deduction.
Some people also incorrectly believe that expired or missing planning permission automatically prevents a deduction. This is not necessarily the case.
Finally, rushing CGT calculations without fully understanding what can be claimed can lead to paying more tax than necessary or facing later queries.
Frequently Asked Questions
Is CGT payable when a property is inherited?
No. CGT usually only arises when the inherited property, or a share of it, is later sold or transferred.
Can improvement costs reduce the CGT bill?
Yes, genuine improvement or enhancement costs may be deductible.
Do repairs and maintenance count as improvements?
No. Routine repairs are usually not deductible for CGT purposes.
What if planning permission had expired or was not required?
This does not automatically prevent improvement costs from being deducted.
What evidence do I need to claim improvement costs?
Invoices, receipts, and other records showing the nature and cost of the work are important.
Should I get professional advice before filing CGT calculations?
Many people find that fixed-fee guidance helps them submit accurate calculations with confidence.
Conclusion
If you’d like to understand your rights and options in plain English, visit LegalGuidance.org — a free resource powered by Martin Taggart Legal Consulting.
For professional, fixed-fee advice from a UK solicitor, visit MartinTaggart.com.
This information is general guidance only and not legal advice. For personalised support, please contact Martin Taggart Legal Consulting.