Q I bought my own house in Limerick in the mid-1980s for £31,000, and subsequently inherited my parents’ home in 2019, which is now my primary residence. My old house has been vacant since, and I’ve recently decided to sell the property, currently valued at €230,000. What tax would I be liable for on the sale?
A You must pay Capital Gains Tax (CGT) on gains made from the sale, gift or exchange of an asset such as land, buildings etc, according to Barry Cahill of Taxback.com. The rate of CGT is 33pc for most gains. CGT is only applied to the “chargeable gain”, not the whole amount you receive.
The chargeable gain of an asset is the difference between the sale price of the house and the amount you paid for it less any allowable expenses, Mr Cahill said. To work out your CGT liability, you would firstly take into account the original purchase price in the late 1980s of £31,000 and its current market value.
As you purchased the house before 2003, you will be eligible to claim indexation relief to reduce your chargeable gain. Indexation relief means that any costs you paid before 2003, related to the asset, are increased to take inflation into account.
You can also subtract deductible purchase and sales costs such as agency fees, legal fees, advertising costs, as well as your personal exemption of €1,270. You will also need to factor in how long the property was your principal private residence, as you will be exempt from CGT for that period of time, Mr Cahill said.
Q We managed to pay off the balance of our mortgage last July. This was after five years since the drawdown of funds. The life policy with the lender runs for another 25 years, covering the initial sum borrowed. I have continued to pay this monthly. Would it be paid out on the reducing balance if we had paid the mortgages full term? I fear, as there was no capital owed, it may not be paid in the event of a death occurring. Should I cancel the policy in this event?
A The most common type of mortgage protection policy is a reducing cover policy.
This is where the amount you are covered for reduces generally in line with your mortgage balance, according to Barry McCutcheon, Proposition Lead at Royal London.
The other type, level-term cover, gives you the same amount of cover throughout the term of the mortgage. If you continue paying into either type of policy after paying off the mortgage, you will still be covered until the policy expires, in 25…….