Warren Shute is a chartered financial planner with Lexington Wealth Management. Contact him on 01793 771093 or warren@lexingtonwealth.co.uk

Q I inherited a property about 10 years ago and sold it in late 2013. Because I inherited it I did not declare the money I received on my tax return. I am now concerned that this may have been incorrect – can you provide any guidance?

A I am going to assume that this was a second property and not somewhere you lived following inheritance.

Given the long period between when you inherited the property and when it was sold almost certainly the value of the property went up, the increase in value is known as a capital gain.

Capital gains are normally calculated as the difference between what you pay for a property and what they are sold for.

In your situation the gain is calculated as the difference between the selling price and probate value and so it is going to be essential that you obtain the probate valuation.

The gain, less the annual capital exemption of £10,900 (2013/14), is then subject to tax and should have been reported on a tax return for 2013/14.

In the event that HMRC discover the taxable gain without you telling them then in addition to the tax becoming due they will also add interest and a penalty.

The benefits of ‘coming clean’ is that a more favourable level of penalty may be levied, and, if your circumstances warrant it then the tax may be repaid by instalments.

If you do not voluntarily make a disclosure and HMRC later discover that tax is due then you can expect quite a severe penalty to be levied.

I would always recommend that you engage an accountant to assist with this procedure.