Q I recently inherited my father’s cottage as sole beneficiary under his will; probate was completed on 7 February 2019. Reluctantly, I have decided to sell the cottage. As I am selling it, do I need to register it as my second home, or not? When it sells, what do I need to do about any tax I might need to pay?
A If there was inheritance tax for your father’s estate to pay, you would have found this out – and would have had to arrange to pay it – before probate was granted so you don’t need to worry about that. You also don’t need to worry about registering your late father’s cottage as your second home as it’s clearly not a second home to you. Even if you do own two (or more) properties and treat them both (or all) as your home, the only thing you need to do is nominate which of the homes is your main home. Telling HM Revenue & Customs (HMRC) the address of your main home – which you must do within two years of acquiring more than one residence – means that when you come to sell it, it should be free of capital gains tax (CGT).
As your late father’s cottage is clearly not your main home, there may be a CGT bill for you to pay. However, any gain you make is calculated by taking the sale price and deducting its value when it became yours (taken to be the value at the date of your father’s death) then subtracting legal fees and estate agents’ fees. If the gain you make (after deducting costs) is less than £11,700 in the 2018-19 tax year (or less than £12,000 if you sell after 5 April 2019), you will have no CGT to pay. If your gain exceeds either of those limits, you pay CGT at 18% on the amount over the limit if you are a basic-rate taxpayer but at 28% if you pay income tax at the higher and/or additional rates. You can tell HMRC about your gain either on your self assessment tax return (if you get one) or by using the HMRC Report Capital Gains Tax online service.