My mother died in December 2000 and left me half her house. She owned the house, mortgage-free, as tenants in common, with her partner – and her will stated that he was allowed to remain in the property unless he cohabitated or remarried.
This never happened and he lived in the house, paying all the bills, council tax etc, for 24 years until he died in December 2023.
I had no contact with her partner after my mother’s death. As the years went by, I was worried that if anything happened to her partner I would not be informed and therefore stood a risk of losing my 50 per cent share of the property.
I consulted a solicitor in 2005 and they advised me to put myself on the deeds, as joint owner with my mother’s partner, which he agreed to. The disposition order preventing me selling my share was written on the deeds.
I never set foot in the house or had any access to the property until I had a council tax demand in December 2023, which was triggered as a result of my mother’s partner’s death.
He left his share in the property to his children from another relationship and we now plan to sell the house.
Would I owe capital gains on the rise in value of the property since my mother’s death?
Taxing times: Do you own a property from the point when you inherit a share even if you cannot take ownership?
It seems very unfair that I would have to pay CGT on a theoretical profit, as I was not allowed any access to the property for 24 years, or any right to try and sell or rent my half without obtaining a court order, which would have involved trying to remove an elderly man from his property.
I had no choice but to allow him to live in the house and I am worried I will face a large bill through circumstances I could do nothing about.
With the disposition in place would I be classed as owning the house from when his probate went through in 2024, or would it be from when the deeds were changed in 2005, or from when my mother died in 2000? B.B
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Harvey Dorset, of This is Money, replies: This appears to something of a sticky situation. Understandably, you feel it would be unfair if you were to face a large tax bill as a result of the increase in value of a house that you have not seen benefit from over the past 24 years.
You could not have sold without a court order, which as you point out would have gone against your mother’s wishes and involved removing an elderly man from his home.
You worry may now face capital gains tax on the rise in value in the property over that time, which was a period of high house price inflation.
Between January 2000 and December 2023, the cost of the average house in the UK increased from just £78,000 to £285,000.
That’s an increase of 265 per cent. In comparison, the cost of goods and services, as measured by the Retail Price Index, has risen by just 106 per cent over the same period, This is Money’s historic inflation calculator shows.
Given that the capital gains tax-free allowance has been cut to £3,000, you could face a potentially hefty bill for any property profits over that period, with the higher CGT rate of 24 per cent likely to apply.
This is Money spoke to two experts to find out more.
Lower bill: Kieran Bowe says CGT would only be payable on any gain from the date of the partner’s death
Kieran Bowe, Partner at Russell Cooke, replies: When your mother died she co-owned her home with her partner. On her death and under the terms of her will she gave her partner the right to live in her one half share of the property for the remainder of his life, this is commonly known as a Life Interest Trust.
You took the appropriate steps in 2005 by registering your interest in the property, presumably as a trustee of the life interest trust, although it is not clear from your question as to who was appointed as executor and trustee of your late mother’s estate.
You have specifically asked whether the sale of the property would trigger a liability for capital gains tax.
The tax position in relation to your late mother’s one-half share of the property is that your mother’s partner is treated as owning your mother’s share of the property in his lifetime for inheritance tax (IHT) meaning that the value of the one half share of the property is brought into account for IHT in his estate.
This means that both your mother’s share of the property and her partner’s share benefit from an uplift for CGT to his date of death.
If CGT is payable then it would only be on any gain from the value of the property as reported for IHT at date of death in 2023 and not from when your mother died in 2000 or when legal title of the property was transferred to you in 2005.
The share of the property transferred to you beneficially in 2023 when your mother’s partner died. This is when you became the owner of the share of the property.
You will not require a court order to sell your share of the property as it is already legally registered in your name, however, you will need to work with the executors of your mother’s partners estate as they will need to be party to the sale as they also retain a one half share.
Finally whilst there is no court order required the trustees of your mother’s will trust will be required to report the termination of the life interest trust to HMRC by completing form IHT100.
Sarah Arora, independent financial adviser at Flying Colours, replies: This is a question with multiple aspects that need to be addressed: the ownership timeline, capital gains tax implications and the nature of your legal rights during the 24-year period.
The ownership is important to determine the liability for capital gains tax.
In 2000, on the death of your mother you inherited an interest in the property via the will.
While the property was occupied by her partner under a life interest (a trust), you became an owner of your share from this point.
In 2005, there was a deed change and your name was added to the property deeds. This formalised your ownership with your mother’s partner, but not necessarily changing your underlying ownership interest. This was done for legal protection.
Your mother’s partner died in 2023. At this point, his life interest ended, and you now gained full control of your share of the property (full possession rights). This date could possibly mark the start of a practical ownership.
Trust: Sarah Arora says the property was occupied under a life interest
As far as capital gains tax is concerned, HMRC usually considers the date of acquisition (2000) as the date you became beneficially entitled to the property for CGT purposes.
However, as the trust was created prior to 22 March 2006 (2000), on the original Life Tenant’s death the base value of the trust assets will be uplifted to their value without any CGT charge.
The uplift removes any unrealised gains. Except for any that have been held over by the Settlor on their gift to the trustees.
Therefore, there will be no CGT between 2000 and 2023.
CGT is a complex area, and I would advise consulting a specialist tax adviser and solicitor for specific calculations, reliefs and advice.
Will there be inheritance tax to pay?
Kieran Bowe adds: Whether there will be IHT to pay will be dependent upon the value of the property and the value of the partner’s estate and the availability of his nil rate band for IHT, transferable nil rate band if a spouse predeceased him and residence nil rate band/s if any assets are directly inherited by the partner’s descendants.
In summary, there should not be any CGT payable as the property benefits from an uplift on the death of the partner, but you should consider whether IHT could be payable, as stated above this will be dependent on the value of your mother’s partners estate and his personal circumstances.