Capital Gains Tax

BobbyJJK

Hi,

I was hoping somebody maybe able to give me an approximate amount of capital gains tax that I need to pay on a house I inherited. I was the sole beneficiary in my late brothers will, after he passed away unexpectedly in 2017, he only had one asset, which was his home, and the house had to be sold to pay off some debts. For reasons we're not sure of, the house sold for quite a bit more than the asking price, and because the estate is being dealt with by an estate management company, I was hoping someone could help me calculate the amount of CGT, so that I know what amount I am likely to receive. The estate management company have been very vague when I’ve asked for figures regarding the will, and have never provided me with a definite answer, which worries me. Hopefully I’ve included all the figures needed to calculate this figure, if not please ask and I’ll add what I have.

House Value at time of death - £280,000.00
Asking price - £310,000.00
Sale Price - £360,000.00

Outstanding Debts
Mortgage - £117,000.00
Unsecured Debts £21,000.00
Estate Management fee £9000.00
Estate Agents Fee - £11,000.00

My brother did not have any life insurance, and because of this the house had to be sold, and I’m told that because of this, the amount of CGT will be charged at the higher rate, apparently this is because I didn’t inherit the house, I only inherit the proceeds of the sale of the house after the debts are paid. All of the information is exactly as I’ve been told by the estate management company, so I hope it all makes sense.

Many Thanks.

redux

I don't know enough about this, so take this with a pinch of salt.

That suggest the net amount for inheritance tax purposes would be £122,000 and for capital gains tax £80,000. But see edit below.

I think the capital gains tax rate for residential property might be 18% for basic rate income tax payers, and 28% for 40% income tax payers, but this needs checking, and there is a £11,300 exempt band. If I'm correct that might mean £12366 or £19236.

However, if in your position I would be hoping to reason that it is unfeasible for the property to have truly increased in value by £80,000 in only a year or so, and this would tend to imply the value was underestimated for probate purposes. Thus I would look into whether there are methods of having this reassessed or adjusted.

Whether this argument is tenable, and with what degree of success, or might be only wild wishful thinking, I have no idea.

I hope some better answers come along later.

Edit: maybe the costs are against the eventual sale, not the value as inherited, so capital gain £60,000 not £80,000

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/

Tom99

[FONT=Verdana, sans-serif]Given the low value of your brother's estate, well below the inheritance tax threshold, the value of the house at the time of death will not have been 'determined' by the probate process.

[/FONT] [FONT=Verdana, sans-serif]Therefore putting forward a different 'acquisition value' for CGT than was used for probate is allowed.

[/FONT] [FONT=Verdana, sans-serif]Depending where you are in the country house prices have been very slow or even falling this last year so a acquisition value that resulted in no CGT would seem reasonable.

[/FONT] [FONT=Verdana, sans-serif]However, assuming you stick with the £280,000 probate value I think the CGT calculation would be something like this for the estate:

[/FONT] [FONT=Verdana, sans-serif]Sale price : £360,000[/FONT]
[FONT=Verdana, sans-serif]LESS[/FONT]
[FONT=Verdana, sans-serif]Value at death: £280,000[/FONT]
[FONT=Verdana, sans-serif]Estate Agent: £11,000[/FONT]
[FONT=Verdana, sans-serif]Legal fees for sale say: £750[/FONT]
[FONT=Verdana, sans-serif]Allowable Personal Representatives costs at 1% of probate value: £2,800[/FONT]
[FONT=Verdana, sans-serif](see Statement of Practice 2 (2004) to check this last item)[/FONT]
[FONT=Verdana, sans-serif]Less annual allowance: £11,300[/FONT]
[FONT=Verdana, sans-serif]= Net Gain £54,150[/FONT]
[FONT=Verdana, sans-serif]Tax at 28% (the rate applicable to estates) = £15,162

[/FONT] [FONT=Verdana, sans-serif]As you can see from the above you would only need to argue that the value at death was c £334,150 for the CGT to be nil, bearing in mind the sale price I don't think that figure is unreasonable.[/FONT]

00ec25

Tom99 wrote: »

[/SIZE][/FONT] [FONT=Verdana, sans-serif]Sale price : £360,000[/FONT]
[FONT=Verdana, sans-serif]LESS[/FONT]
[FONT=Verdana, sans-serif]Value at death: £280,000[/FONT]
[FONT=Verdana, sans-serif]Estate Agent: £11,000[/FONT]
[FONT=Verdana, sans-serif]Legal fees for sale say: £750[/FONT]
[FONT=Verdana, sans-serif]Allowable Personal Representatives costs at 1% of probate value: £2,800[/FONT]
[FONT=Verdana, sans-serif](see Statement of Practice 2 (2004) to check this last item)[/FONT]
[FONT=Verdana, sans-serif]Less annual allowance: £11,300[/FONT]
[FONT=Verdana, sans-serif]= Net Gain £54,150[/FONT]
[FONT=Verdana, sans-serif]Tax at 28% (the rate applicable to estates) = £15,162

[/FONT] [FONT=Verdana, sans-serif]As you can see from the above you would only need to argue that the value at death was c £334,150 for the CGT to be nil, bearing in mind the sale price I don't think that figure is unreasonable.[/FONT]

I fully agree with arguing the probate valuation needs to be replaced with a more accurate one

however, I think you are wrong claiming both the 1% allowance and the actual costs. It is an either or situation re estate agent fees etc
http://www.legislation.gov.uk/ukpga/1992/12/section/38/enacted

s38 2.
...the incidental costs to the person making the disposal ...of the asset ...shall consist of expenditure wholly and exclusively incurred by him for the purposes of .... the disposal, being fees, commission or remuneration paid for the professional services of any surveyor or valuer, or auctioneer, or accountant, or agent or legal adviser and costs of transfer or conveyance (including stamp duty) .....

(b) in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act.

dimbo61

3% estate agent fee ?
Wow that is a huge fee Foxtons ? Or down south ?
Around here it is 1% plus Vat

Tom99

00ec25 wrote: »

I fully agree with arguing the probate valuation needs to be replaced with a more accurate one

however, I think you are wrong claiming both the 1% allowance and the actual costs. It is an either or situation re estate agent fees etc
http://www.legislation.gov.uk/ukpga/1992/12/section/38/enacted

s38 2.
...the incidental costs to the person making the disposal ...of the asset ...shall consist of expenditure wholly and exclusively incurred by him for the purposes of .... the disposal, being fees, commission or remuneration paid for the professional services of any surveyor or valuer, or auctioneer, or accountant, or agent or legal adviser and costs of transfer or conveyance (including stamp duty) .....

(b) in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act.

[FONT=Verdana, sans-serif]That 1% allowance is the amount allowed in substitution for the acquisition costs, you are still allowed the disposal costs as well.

[/FONT] [FONT=Verdana, sans-serif]https://www.gov.uk/government/publications/statement-of-practice-2-2004--2/statement-of-practice-2-2004--4[/FONT]

Keep_pedalling

I would throw this back at the cowboys who administered the estate, they are after all charging rip off fees so they need to earn some it. They along with those very expensive estate agents have made a right pigs ear out of valuing the house, they need to sort this.

An executor has a duty to the beneficiaries to achieve the most out of the estate, and if they fail to do this they can be held personally responsible for the shortfall. As these rip off merchants are not regulated this could mean you end up having to pursue them through the courts.

Jenniefour

Agree with keep pedalling. Looks like this is being royally mis-managed. There should be no capital gains tax to pay and the value of the estate is not high enough to pay IHT.

BobbyJJK

I’m down south, the estate management company instructed an estate agent and dealt with it, I have had a real tough job trying to get any figures out of them, I had to wait until after the sale had completed and the money in the estate account before I knew what the estate agents fee was.

How do I go about getting the house re-valued from the date of death ??

Many thanks for all the replies.

BobbyJJK

The valuation was carried out by an estate agent who was unable to get inside the property, so decided to do an external valuation, and the probate value of the house was based on that.
Thanks.

Tom99

BobbyJJK wrote: »

How do I go about getting the house re-valued from the date of death ??

Many thanks for all the replies.

[FONT=Verdana, sans-serif]Whoever is administering the estate will normally be the one who submits a CGT return and it would be their responsibility to declare a value as at DOD.[/FONT]
[FONT=Verdana, sans-serif]Bearing in mind the low figure returned for probate it would probably be a good idea to commission a proper RICS valuation which hopefully will come out at a figure closer to the sale price.[/FONT]