Capital Gains tax after selling late father's home

TrickyNicky

My Dad died just over a year ago and my sisters and I inherited his estate (bungalow and other assets). Probate was granted a year ago with no inheritance tax to pay. We have now sold the bungalow for slightly less than the estimate for probate. The property had been empty for the past year.

Two of my sisters were the executors of my Dad's will and the money has been paid to an account opened by them on my Dads death in order to be able to pay for things like insurance, electricity and gas etc.

Do all of us now have to pay Capital Gains tax on our share of the sold property? If we each invest the money in ISAs, Premium Bonds or similar will this reduce the amount of CGT we pay?

I don't know whether this is relevant but I live in Scotland and my sisters in England. We all own or have mortgages on the properties we live in and all of us pay a low rate income tax on our salaries.

Also not sure if this is relevant but the bungalow was part owned by Dad and part by a trust fund (using funds from my Mums estate after she died).

I found the official website re Capital Gains Tax very difficult to understand and just wondered if anyone can enlighten us.

Many thanks in advance for any advice/information.

Slithery

Was the property ever transferred into you and your siblings names or was it sold by the estate?

Even if the former is true then unless this is a ultra high-end property in a rapidly inflating market then 1 years gain should easily fall within your respective allowances.

Edit - Just noticed that you said there hasn't even been a gain. So no, nothing to pay.

G_M

CGT is not payable on death - Inheritance tax is.

You say his Estate was below the IHT threshold so IHT was not due. That's great.

The property has been sold now. Since there has been no gain in value between the date of death (Probate value) and sale date, CGT is not due.

The money can now be distributed by the Estate to the Beneficiaries, tax free. What happens thereafter depends what each Beneficiary chooses to do with their share.

MovingForwards

Did you transfer the property into your names then sell or just sell it as your late dad's?

If your late dad's then no CGT.

G_M

MovingForwards wrote: »

Did you transfer the property into your names then sell or just sell it as your late dad's?

If your late dad's then no CGT.

No CGT either way as there was no capital gain!

TrickyNicky

Thank you for your prompt replies. The bungalow stayed in the same ownership until sold. That was approximately two thirds of the property was owned by 3 named trustees from my Mums estate and one third by my late father.
It was the solicitor who sold the house for us that advised us there would be CGT to pay. Clearly all the sisters will now receive an 'income' when the funds are distributed. This is in addition to our salaries. Does this need declaring to the Income Tax man at the end of the year then or is it totally tax free?

xylophone

Clearly all the sisters will now receive an 'income' when the funds are distributed

No, they are receiving the proceeds of sale of an asset. This is not subject to income tax.

G_M

As xyliphone says, they are not receivig income. No tax to declare or pay.

Tax may become due later depending what they do with the money they receive eg

* they invest it (stock market, fine art, etc) - if the value of that investment increases, then CGT may be due on that when they eventually sell
* they save it (bank saving account) - income tax may be due on the interest they earn if they are higher rate tax payers or earn more than £1000 in interest in a tax year
* Inheritance Tax if they die and their total Estate is over the IHT threshold

TrickyNicky

Thank you all. Our solicitor has yet again caused distress and upset when it wasn't necessary. It has all been stressful enough without this.

Keep_pedalling

TrickyNicky wrote: »

Thank you for your prompt replies. The bungalow stayed in the same ownership until sold. That was approximately two thirds of the property was owned by 3 named trustees from my Mums estate and one third by my late father.
It was the solicitor who sold the house for us that advised us there would be CGT to pay. Clearly all the sisters will now receive an 'income' when the funds are distributed. This is in addition to our salaries. Does this need declaring to the Income Tax man at the end of the year then or is it totally tax free?

There may be CGT to pay on the 2/3ds of the property if the value increased significantly from the time it was transferred to the sisters. How long ago was that and what sort of trust was used?

TrickyNicky

Hi Keep Pedalling. I don't know what kind of trust but I was one of the trustees! My Mum and Dad both owned a previous family home as tenants in common. My Mum died 14 years ago and my Dad continued to live in the property but technically, only half the house was his. The other half, my Mums share, was then kept in trust. About 7 years ago, my Dad sold the bigger property and moved into a smaller one. With the trustees permission, he bought this property using my Mums share of the sale of the bigger property plus some of his own share. The value of the property has gone up about £80,000 in those 7 years.

Does this mean we might have to pay CGT on two thirds of this £80,000?