Posted 9 November 2023

Tax on doing-up a probate house to sell.

I'm currently putting my late parents' house through probate. It's a doer-upper, needing a re-wire, new boiler, kitchen etc.

EDIT: To clarify, this question is about when the house has passed to a beneficiary of the estate when any/all IHT liability has been paid.

If its probate value is 100k, and I were to spend 30k on it and then sell it for 200k, would I be taxed on 100k increase in value, or could I claim the 30k costs against tax and be taxed on 70k net gain?

I've read confusing articles which say it's only the addition of NEW amenities which can be offset against tax, so if it's already got a kitchen, however dilapidated, you can't claim the new kitchen cost against your capital gain.
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  1. cokezone1113's avatar
    Sounds like the £30,000 in costs are capital in nature and therefore allowable as a deduction in arriving at the capital gain.

    You ultimately need to go through the expenditure and look at what is capital and what is not (repairs).

    A starting point would be to understand the Odeon and the law shipping co case.
  2. Wolfout's avatar
    gov.uk/val…lue

    There’s normally no Inheritance Tax to pay if either:

    • the value of the estate is below the £325,000 threshold
    • you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club
    cokezone1113's avatar
    What has IHT got to do with an asset that has been passed to a beneficiary of an estate after probate? (edited)
  3. tcf's avatar
    Author
    IHT isn't relevant to this. Any IHT has been dealt with, and the house may now either be sold as is, or done-up.
  4. harrythefish's avatar
    We had updated fire doors and fire stopping measures fitted at the buy to let flat, circa £7,000 per resident. All my research showed this was only allowable as an expense against rental income, not against capital gains. Because it was an update to be classed as maintenance.

    It's practically impossible to find proof on the subject as HMRC's website remains vague (convenient for HMRC). (edited)
    mutley1's avatar
    You can only claim against capital gains if the work increased the value of the property, so an improvement. (edited)
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