Capital Gains Tax On Inheritance

gerri68

Capital Gains Tax Question:

Myself and two siblings are beneficiaries in our parents will, the estate has been granted probabte and we are in the process of selling my mothers house - Originally marketed in 2010 for £150,000 but now dropped to £130,000 to reflect the reality of the housing market.
House still has a morgage attached to it & other debts to pay from the estate before any remaining money is divided up between the three beneficiaries.
When house sells, in theory we should each recieve approx £20,000 each. Is this liable for capital gains tax? (The estate value means we are not liable for inheritance tax).
I am getting conflicting information on this - On the one hand the value of the house has (on paper decreased) since the death of mother and therefore we have not made a 'gain' BUT the house has never been in any of our names, it is still owned by the estate, therefore to my mind anything that comes our way out of the proceeds of the estate could still be classed by HMRC as a 'gain' and therefore liable for Capital Gains Tax?

Any help would be good - Don't want to spend the money and then get a tax demand !

CLAPTON

there is usually no cgt on the sale of a property in these circumstances

cgt will arise on any INCREASE in value from the probate value and the sale price. (or HMRC determined if the probate value is challenged by the HMRC)


and as you each have a10,600 cgt allowance I can't see in practice there is any likelihood that cgt will arise.

John_Pierpoint

On death you pay Inheritance Tax and the Capital Gains Tax initial value resets to the probate value.

Reading between the lines the estate is below £325k (or £650k if this is the second member of a couple to die and the first left everything to their legal partner) ?

So your IHT liability would all have been in the nil rate band. Now you appear to be making a loss on the probate value so no CGT to pay.

Had you paid IHT and then sold the property at a loss within 2 years, the sale price could be substituted for the probate guestimate and some of the IHT reclaimed.

barak

00ec25 wrote: »

not if its sold by the executor, in that case there is only one allowance...

This may or may not be relevant here, but in some circumstances the ownership of the property can be split between the three beneficiaries before being sold resulting in three separate CGT allowances.