Tax situation with investments on death

GreatUncleKip

Hi there

I am currently in the final stages of dealing with a relatives estate.
I am aware that any cash in savings etc is subject to inheritance tax.

However, what about investments? I am assuming my relative filled in a tax return every year on the profit/loss of his investments.

How is this calculated? Also, is this tax due before the inheritance tax total is calculated?

Any advice hugely appreciated.

dunstonh

What tax wrapper are the investments in? Is there any trusts involved?

GreatUncleKip

There are some funds in a Halifax investment account, but the majority are with Threadneedle investments, where 3 separate accounts were held.

grey_gym_sock

income from investments and any realized capital gains are taxed each year.

unrealized capital gains are not taxed at all. any unrealized capital gains at the date of death escape from capital gains tax.

whoever inherits the investments uses the value at the date of death as the cost for capital gains tax purposes.

GreatUncleKip

We would ideally like to 'cash in' the investments as part of the private process, so that the shares are converted into an agreed cash sum.

oldvicar

Investments would normally valued at the date of death. Unrealized gains/losses to this point would be completely ignored with no Capital Gains Tax payable on death. The valuation at date of death would be used in calculating any Inheritance Tax (IHT).

Once IHT is calculated and paid, you will obtain the Grant of Probate. At this point the Personal Representatives can cash in the investments (at the prices pertaining on the day you cash in, which is likely to be different to the probate value). As an alternative it is sometimes possible to transfer the investments to benficiaries if preferred.

So it is likely that the cashed in value of the investments will vary from the valuation used when paying IHT. If they have gone up a lot, then the estate may have to pay CGT on the rise since death above a certain limit. If they have fallen a lot in value then it may be possible to claim back some of the IHT paid.