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[amazonian]

It seems that CGT is payable on the difference between what the property is worth when the person dies, and what the property is worth when the property is sold ( less expenses)

For example. Uncle Percy leaves you a house in his will valued at £200,000........so well below the threshold for Inheritance tax.

The house is sold a year later for £300,000.

Therefore you would be liable for CGT on £100.000 less the tax threshold of £11100.........so £88,900 at either 18% or 28%.

This applies even if the property was Uncle Percy's only home.

£100,000 Minus any costs incurred in the selling process eg solicitors fees and estate agents and any other costs involved.

 

[LC0112G]

Yes....sort of.

It is slowly becoming more clear.

It seems that CGT is payable on the difference between what the property is worth when the person dies, and what the property is worth when the property is sold ( less expenses)

For example. Uncle Percy leaves you a house in his will valued at £200,000........so well below the threshold for Inheritance tax.

The house is sold a year later for £300,000.

Therefore you would be liable for CGT on £100.000 less the tax threshold of £11100.........so £88,900 at either 18% or 28%.

This applies even if the property was Uncle Percy's only home.

If those figures and timescales are correct, I would be keeping a very low profile w.r.t. the tax man, and just pay the CGT bill @ 18/28% (mostly 28% on those figures I expect). You don't want them investigating how/why the value of the house has risen by 50% in 12 months unless there is a very good reason for it. It smacks of someone undervaluing the house for the purposes of keeping Uncle Percy's estate under the £325K value at which inheritance tax @ 40% would have be payable. 

Unless someone wants to live in the deceased house, it is often better for the house to be sold by the executors of the deceased estate, and then the monies passed onto those who are due to inherit, rather than for them to inherit the house and sell it.

[Field Marshal Dr. Opti]

The executors and those that inherit are often one and the same.

[LC0112G]

The executors and those that inherit are often one and the same.

Yes, but, the CGT issue only arises once the assets are distributed to the recipients. The deceased's estate is a separate legal entity managed by the executors up until that point, and the assets don't become the property of the inheritors until after the grant of probate. The deceased estate could instead sell the assets, and pass on the cash to the inheritors (subject to some ifs and buts). My view is that this is simpler if there is more than one beneficiary to the estate, unless you intend to live in the inherited house, or let it out and run it as a BTL investment.

The point I was making is that if someone is an inheritor and a/the executor then you need to be careful with HMRC about the disposal of high value assets like houses. Many people try to 'fudge' the inheritance tax rules by underestimating the value of the house to get the estate value to less than £325K thus avoiding the 40% inheritance tax, without realising that it leaves you liable to a 28% CGT liability when you finally sell the house at it's 'true market' value. It's possible that paying 40% on the amount above £325K may be cheaper than paying 28% on the difference between the 'fudged' and 'true market' values.

There is also the possibility that HMRC may want to know how/why the house has risen in value by 50% in under a year. The executors could end up in a very painful and costly court case if HMRC think it's because they've been diddled out of inheritance tax. It's easier for HMRC to pick on you rather than Starbucks/Google et al.

[Shackeng]

I have been executor for three wills, in each case a property was involved, and in each case the property was sold as soon as possible after probate was granted in order to distribute the estate(s) to the beneficiaries ASAP. Although in two cases, there may arguably have been a small gain in value between death and property sale, only inheritance tax was paid where due, and, as all the figures were presented to HMRC in order to agree inheritance tax(es) due, there was no requirement for CGT, as the sale prices achieved by the property(ies) was/were agreed as its/their value at death. So I suppose it depends how long after death that the property is sold, and I doubt HMRC will pursue you for CGT provided that every effort is made to settle the estate in a timely manner, unless there is a significant gain in value.

[LC0112G]

I have been executor for three wills, in each case a property was involved, and in each case the property was sold as soon as possible after probate was granted in order to distribute the estate(s) to the beneficiaries ASAP. Although in two cases, there may arguably have been a small gain in value between death and property sale, only inheritance tax was paid where due, and, as all the figures were presented to HMRC in order to agree inheritance tax(es) due, there was no requirement for CGT, as the sale prices achieved by the property(ies) was/were agreed as its/their value at death. So I suppose it depends how long after death that the property is sold, and I doubt HMRC will pursue you for CGT provided that every effort is made to settle the estate in a timely manner, unless there is a significant gain in value.

That's fine - the deceased estate also has a CGT allowance of £11100, so providing the property is sold promptly, there would be no reason for HMRC would quibble that the value at death was significantly different to the sale price less sale expenses. The meaning of 'promptly' is obviously open to debate, but 3-6 months doesn't seem unreasonable period in which to sell a not very liquid asset.

https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

[nemo]

If there was a mrs Percy who was joint owner of said property I think her inheritance tax allowance can transfer to uncle Percy's estate making the limit £650,000 but I don't know the ins and outs of how it works so expert advice is needed

[Field Marshal Dr. Opti]

I have contacted HMRC who say the house needs to be 'independently valued' as soon as is possible.....presumably by an estate agent.

This figure will then be compared with the price of the house when sold to see if CGT is payable.

[nemo]

We had to have the house valued for probate. Be careful though one estate agent wanted to charge nearly a grand for this,the rest did it for free hoping to get the sale. We had three valuations and used an average.

[Entwood]

We had to have the house valued for probate. Be careful though one estate agent wanted to charge nearly a grand for this,the rest did it for free hoping to get the sale. We had three valuations and used an average.

Exactly what I did, and the probate office/HMRC were more than happy. As long as you are SEEN to be trying to do the right thing rather than trying to fiddle both Probate and HMRC bend over backwards to help in my experience