Capital Gains on Inherited Property

Danger_Mouse

Hi, I'd appreciate some advice on capital gains tax on an inherited property as Im really not sure what I would need to pay.

My brother and I inherited a property from our uncle, each receiving an equal share. For Inheritance tax purposes, the house was value at £350k but we are just about to put it on the market for £370k.

If it sold for £370k Im assuming we pay capital gains tax on the difference and not more inheritance tax? also, would capital gains tax be split down the middle from my brother and I, so I owe it on £10k gain and the same for my brother?

Or if its £10k gain each, do we even have to pay it at all? based on the £12,300 allowance? (we havent gained any other money in the past year)

Borders2017

If the house has already been valued at the time for inheritance tax at 350 and the estate has paid any relevant tax, then no further tax would be due.
As the likely profit (minus estate agents fees and other deductions) would be less then your individual CGT threshold it would be unlikely you have to ay and additional tax this TY.

JGB1955

You won't have to pay anything - your personal capital gain is less than the £12,300 allowance (assuming you haven't also sold a load of shares at a significant profit!).

p00hsticks

Has the property been transferred into your names prior to the sale, or is the estate selling it ?

Danger_Mouse

p00hsticks said:

Has the property been transferred into your names prior to the sale, or is the estate selling it ?

No it hasnt been transferred into our names 

JGB1955

Danger_Mouse said:

p00hsticks said:

Has the property been transferred into your names prior to the sale, or is the estate selling it ?

No it hasnt been transferred into our names 

In that case, the estate is responsible for the CGT 

p00hsticks

JGB1955 said:

Danger_Mouse said:

p00hsticks said:

Has the property been transferred into your names prior to the sale, or is the estate selling it ?

No it hasnt been transferred into our names 

In that case, the estate is responsible for the CGT 

And my understanding is that the estate has a single CGT allowance that can be used, so there will potentially be a small amount of CGT for the estate to pay. 

macman

Danger_Mouse said:

p00hsticks said:

Has the property been transferred into your names prior to the sale, or is the estate selling it ?

No it hasnt been transferred into our names 

So neither of you will ever own it, and so have made no gain. 

Jeremy535897

There are two points to clarify here, as OP is talking about a potential future sale:

• was the value of £350,000 actually agreed by HMRC? If no inheritance tax was payable, it won't have been agreed, and could be challenged on a future sale
• who is actually selling the property? The OP suggests it is the legatees ("but we are just about to put it on the market for £370k."), but the executors will have to transfer the property to them first (and I would expect them to do this, given that the will apparently leaves the property to the legatees, rather than the proceeds, and there is the likelihood of a capital gains tax liability on the executors), otherwise, as noted above, the executors will be liable (but they may well be the same people as the legatees)

Clearly some advice should be sought from the solicitor dealing with the estate. (I am assuming Scottish law does not apply, as that may be different.)

Danger_Mouse

Jeremy535897 said:

There are two points to clarify here, as OP is talking about a potential future sale:

• was the value of £350,000 actually agreed by HMRC? If no inheritance tax was payable, it won't have been agreed, and could be challenged on a future sale
• who is actually selling the property? The OP suggests it is the legatees ("but we are just about to put it on the market for £370k."), but the executors will have to transfer the property to them first (and I would expect them to do this, given that the will apparently leaves the property to the legatees, rather than the proceeds, and there is the likelihood of a capital gains tax liability on the executors), otherwise, as noted above, the executors will be liable (but they may well be the same people as the legatees)

Clearly some advice should be sought from the solicitor dealing with the estate. (I am assuming Scottish law does not apply, as that may be different.)

Thanks for your reply.

* Inheritance tax was payable so I 'assume' that means HMRC have agreed on the valuation?
* I honestly dont know the legal stance on point two, hopefully our solicitors will advice but my brother and I are both executors and trustees of the will. The property is still legally in our uncle's name 

Jeremy535897

As inheritance tax was paid, you should be able to rely on the probate value for calculating the gain.

As you are the executors, it will be down to you to decide whether it is best to appoint the property to you, or sell as executors. Discuss it with the solicitor. On the figures, it may be best to appoint to you, but as executors you have a £12,300 exemption, and after selling costs and maybe a small drop in price to get it sold, there may be no capital gains tax either way.

For further information, see:
https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2021