CGT help

Shezz

Hi, thank you in advance for your replies.

I will try and make this easy and as simple as I can Sorry it is sooooooo long

My mum passed in March this year, executors are myself and two sisters
We filled out the IHT forms (no tax due as we used out dads inheritance tax as well as my mums, so we was well below the threshold) for the purpose of the IHT the house was valued in various ways, estate agents, online and looking at prices around the area at  the time, the figure used on the IHT was 350,000 when applying for Probate.

By the time it was put on the market for sale, there was a boom in housing, it was agreed to market it at 365,000 and 375,000 (although we never really thought we would get the high end offer), a cash buyer has come in at 375,000 (of course we accepted). although this might be likely to change once survey is done or what every they throw at us as a reason to cut the price.

but for this purpose I will use the high end figure.

Am I right in thinking that the estate will be responsible for paying the CGT  as until it sells it still belongs to my mother (left to me to sort this out as one of the executors).

I have researched constantly and think I have worked it out (hopefully) can you let me know if my calculations are right or a big no no.

sale price 375,000 -  Probate price 350,000 gain made, 25000.00 

Less (estimated costs) Solicitors 2100.00 Less Estate agents fees costs 3500.00 = 5600.00
Less (not sure what it is called) CGT exemption. 12,300

25000.00 - 5600.00 - 12300.00 = £3600.00

SO the figure that CGT is due is % (cant remember the percent maybe 10%) of £3,600

Is this correct, also do I need to let IHT tax know that the price of the house sold is different to what was on the form, and am i right in thinking the people who inherited the money do not have to pay any CGT as the estate has paid it..

Please advise if I have gone wrong anywhere.

Marcon

CGT would be payable at 28%, not 10%, on the net proceeds.

p00hsticks

Was any IHT due on the estate ?

{Edit - I've re-read the post and see that there wasn't]

If so, and the property is still in the name of the deceased then you can correct the value used in the probate application for up to two years after the death

https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4

xylophone

https://advisingfamilies.org/uk/information-portal/managing-money/how-is-capital-gains-tax-charged-on-death/#:~:text=When someone dies their estate,distributed to the person's heirs.&text=The beneficiary is treated as,tax-free uplift on death.

Often the executors will sell some or all the assets, and then distribute the cash to the beneficiaries. In this case it is the executors who make any post-death gains/losses, so they will submit a tax return to HM Revenue & Customs and pay any CGT due.

The executors are able to claim the full annual CGT exemption, currently £12,300 for 2021/22, in the year of death and in the two following tax years. Any chargeable gains are subject to CGT at the higher rate, which is 28% for residential properties and 20% for all other chargeable assets.

However, there can be some tax planning opportunities if assets are handed to beneficiaries before they are sold. The beneficiaries can stagger the sales of assets over different tax years, and possibly claim multiple annual CGT exemptions. They can also utilise any personal capital losses they may have brought forward, and potentially pay tax at a lower rate than the executors, if any of the gains fall within their basic rate band, so they would pay tax at 10/18% instead of 20/28%.

Shezz

Marcon said:

CGT would be payable at 28%, not 10%, on the net proceed 

Thank you for that didn't know it was 28%, net proceeds ? (difference between probate figure and sale figure- minus house expenses is that correct)

Shezz

p00hsticks said:

Was any IHT due on the estate ?

{Edit - I've re-read the post and see that there wasn't]

If so, and the property is still in the name of the deceased then you can correct the value used in the probate application for up to two years after the death

https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4

As no inheritance tax was due I did not fill out the IHT400 form, the form this link to says you can change the figure submitted on the IHT400 ? even with the extra amount we are well below the inheritance tax limit

Shezz

xylophone said:

https://advisingfamilies.org/uk/information-portal/managing-money/how-is-capital-gains-tax-charged-on-death/#:~:text=When someone dies their estate,distributed to the person's heirs.&text=The beneficiary is treated as,tax-free uplift on death.

Often the executors will sell some or all the assets, and then distribute the cash to the beneficiaries. In this case it is the executors who make any post-death gains/losses, so they will submit a tax return to HM Revenue & Customs and pay any CGT due.

The executors are able to claim the full annual CGT exemption, currently £12,300 for 2021/22, in the year of death and in the two following tax years. Any chargeable gains are subject to CGT at the higher rate, which is 28% for residential properties and 20% for all other chargeable assets.

However, there can be some tax planning opportunities if assets are handed to beneficiaries before they are sold. The beneficiaries can stagger the sales of assets over different tax years, and possibly claim multiple annual CGT exemptions. They can also utilise any personal capital losses they may have brought forward, and potentially pay tax at a lower rate than the executors, if any of the gains fall within their basic rate band, so they would pay tax at 10/18% instead of 20/28%.

1)  there are 3 executives and we are all beneficiaries, so as executives we will sell the house, (no real assets is the house,) pay the CGT on the gains.   would the tax return have to be in all our names or can just 1 person put their name to it or would that be in the name of my late mother ? as it will be her property at date of sale.

2) Thank you I thought it was £12300 but did not know it was 28%

3) 3 of the executives are also the main beneficiaries with 5 others getting 1% each, as executives we will sell the property and pay any CGT thats due at 28%, we really want this over, just want to make sure the calculations are ok, also worried about the tax return as do not know who should submit it, as the estate will be the one who is paying it.

Thank you to everyone for your responses

p00hsticks

Shezz said:

p00hsticks said:

Was any IHT due on the estate ?

{Edit - I've re-read the post and see that there wasn't]

If so, and the property is still in the name of the deceased then you can correct the value used in the probate application for up to two years after the death

https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4

As no inheritance tax was due I did not fill out the IHT400 form, the form this link to says you can change the figure submitted on the IHT400 ? even with the extra amount we are well below the inheritance tax limit

In your shoes I'd be tempted to get in touch with HMRC to confirm what needs to be done. If the estate is still under the IHT threshold even though the property is selling for a bit more than declared on probate, and it's not long afte the death, I'd be asking if there is a way the probate record can just be amended and therfore no CGT would be due.