Capital Gains Tax from an 'Estate'

suttree63

Hello Wise People,
Hope I'm posting this in a suitable slot.
I'm not the sharpest tool in the box so please can someone answer this :


I am one of four equal beneficiaries in a Will (mainly a house). One beneficiary is a spouse the others are relatives.
The house value when probate was issued was £250,000.
The house looks like it will sell at £290,000 to £300,000.


How much capital gains tax will we have to pay?


Many thanks.

unforeseen

If the house is being sold to as part of probate to enable beneficiaries to be paid their inheritance then any CGT liability is on the estate and not the beneficiaries.

http://www.wilkinskennedy.com/services/tax/tax-factor/what-to-do-about-capital-gains-tax-when-someone-dies/

suttree63

Thank you, I just went to that link you provided ... I think now I understand it!


Before reading it I thought that if the house sold for, say £290000 then the difference from the probate value would be £40000.


And with a spouse not having to worry about the cgt issue then the remaining three beneficiaries, each with an £11,100 (I think)
allowance, would face a cgt 'bill' of £6700.00


i.e. 3 x 11,100 = 33,300 and 40,000 minus 33,300 = £6700.00 !!


By the way, what is the current tax rate for cgt ?

unforeseen

It is 28% for PRs of somebody who has died but you also need to take account of the personal allowance of £11,100 per year.

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

You’re entitled to the Annual Exempt Amount for the tax year in which the death occurred and the following two tax years. After that there’s no tax-free allowance against gains during the administration period.

TheCyclingProgrammer

If the house sells for £290k, the gain split 4 ways would surely mean a £10k gain each so within your CGT allowance?

unforeseen

TheCyclingProgrammer wrote: »

If the house sells for £290k, the gain split 4 ways would surely mean a £10k gain each so within your CGT allowance?

No because the beneficiaries are not the owners.

The estate is still the owner and is selling it to satisfy the bequests in the will

jimmo

unforeseen wrote: »

If the house is being sold to as part of probate to enable beneficiaries to be paid their inheritance then any CGT liability is on the estate and not the beneficiaries.

That's fair enough.

unforeseen wrote: »

No because the beneficiaries are not the owners.

The estate is still the owner and is selling it to satisfy the bequests in the will

How do you know that?

unforeseen

jimmo wrote: »

That's fair enough.

How do you know that?

A fair guess from the wording of the OP and the title

Would the OP care to clarify whether the house has been transferred to the beneficiaries yet?

suttree63

Morning all, ... hmmm ... I'm erring on the side of 'confused' again.

To Jimmo and Unforeseen:
I'm not sure what is mean't by 'has the property been transferred to the beneficiaries yet'.
All I know is that probate was granted to the two executors 1.4 years ago. One of the executors is also a beneficiary.

To clarify:
The house is the main part of the 'estate'. It is being sold to enable the four equal beneficiaries to be paid their quarter share. There is one spouse and three close relatives. I believe a spouse is exempt from CGT?
We think the house will sell for approx. £290,000.
The deceased passed away 1.5 years ago when the house was valued at £250,000.
The main question I ask is 'How much cgt will the beneficiaries have to pay - or - if, as suggested above, how much will the 'estate' owe in cgt?
Also, if it is the 'Estate' that owes cgt then how and when is that cgt paid?
If anyone can give me (in simple terms) a definitive answer I would be most grateful.

booksurr

suttree63 wrote: »

I'm not sure what is mean't by 'has the property been transferred to the beneficiaries yet'.
All I know is that probate was granted to the two executors 1.4 years ago. One of the executors is also a beneficiary.

it means are the 4 beneficiaries now listed as the legal owners of the property if you look at the land registry records or is the property still owned in the name of the deceased.

if the deceased is still the owner then the sale is being undertaken by the executor and it is the estate who is liable and gets only one allowance (and after 1.4 years, time is ticking as the allowance is only available for 2 tax years after the year of death)

if the property is owned by the beneficiaries then they are selling it and each gets their own allowance on their own share of the gain

the complicating factor is whether the executor is selling as a bare trustee of the estate. In that case the gain is attributed to each each beneficiary and each gets their own allowance. Bare trustee status is down to what the will said about who gets what and whether the estate is still in the administration period when the sale takes place. Perhaps you need pay a solicitor to handle the estate?

Have you read...
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323671/hs282.pdf

suttree63

Thank you Booksurr,
Of the two Executors, one is 'power reserved' and the main Executor is one of the beneficiaries.
That's been very helpful. I know that the Executor has the property in his name now but whether or not as a 'bare' trustee I'm not yet sure.


If not then I suppose he has to carry the burden of the cgt ?


and re the spouse, they are exempt aren't they?