CGT on sale of property

SiliconChip

I have applied for probate today, with a net valuation of the estate coming out at £150K under the £625K available threshold so IHT is extremely unlikely to become an issue.

The deceased's residence was valued at £300K for probate purposes. It probably won't be sold until spring 2022 so there is the possibility of sale prices rising between now and then.

Say the house sells for £320K, giving a capital gain (ignoring any allowable expenses) of £20K.

Questions:

1. Am I correct that the estate has an allowance of £12,300, so CGT would be due on £6,700? And that the rate of CGT would be 28%, so £1,876 would have to be paid within 30 days of the sale?

2. Is it normal for the solicitor handling the sale to also do the CGT calculation and pay it out of the sale proceeds, or is the MSE-friendly option to do it yourself?

3. Almost certainly hypothetical - If the capital gain was a lot higher, say £100K, would it be cost effective to vary the Will to transfer ownership to some or all of the beneficiaries (basic rate taxpayers) first so that their own allowances and lower CGT rates could be used? Obviously this would only make sense if the tax saving is greater than the cost of transfer.

BooJewels

I'm in the same situation, but don't fully understand it myself yet.

But I can clarify a couple of points, as I understand them - the CGT is calculated after allowable expenses, such as the EA fees and conveyancing costs - so if it costs you say £5k to sell it - then CGT would be payable on £2,700 (I think you meant £7,700 after the allowance).  I think the rate is 18% (unless you're a higher rate tax payer and paying it personally) for the estate to pay.  Others can perhaps clarify that.  So those differences would bring your bill to around 486 quid.

They also just increased the payment deadline to 60 days.

Our conveyancing solicitor does explicitly state in the agreement we signed for their services that CGT is not covered and we will need to seek guidance elsewhere and make arrangements to pay it for ourselves.

SiliconChip

BooJewels said:

I'm in the same situation, but don't fully understand it myself yet.

But I can clarify a couple of points, as I understand them - the CGT is calculated after allowable expenses, such as the EA fees and conveyancing costs - so if it costs you say £5k to sell it - then CGT would be payable on £2,700 (I think you meant £7,700 after the allowance).  I think the rate is 18% (unless you're a higher rate tax payer and paying it personally) for the estate to pay.  Others can perhaps clarify that.  So those differences would bring your bill to around 486 quid.

They also just increased the payment deadline to 60 days.

Our conveyancing solicitor does explicitly state in the agreement we signed for their services that CGT is not covered and we will need to seek guidance elsewhere and make arrangements to pay it for ourselves.

You're right, my mental arithmetic let me down, it is £7,700. And I did say that I was ignoring allowable expenses.

My reading of the CGT rates page is that an estate sale falls under the If you're a trustee or business heading, and would therefore be 28% for property, but it's not clear hence my question.

https://www.gov.uk/capital-gains-tax/rates 

I didn't know about the extension but I can see you're right, so that's good to know.

And we're nowhere near starting the sale process yet so haven't spoken to solicitors, but it's interesting to know that it is excluded in your contract.

Keep_pedalling

How did you value the property?

Hal17

Interesting to see the replies to this post. In a similar position as an executor of having to sell a house valued at £300K and then distributing the proceeds to 5 beneficiaries. Have no clear understanding on the CGT implications against the actual sale price that might be achieved.

thegreenone

I did CGT online a couple of weeks ago and believe me, if I can do it, anyone can!   

The solicitor sent me a breakdown of money received, their fees and EA fees.

Probate value: £350k.  Sold for £375k.  Fees approx. 6k = £1725.25 CGT payable.  Website did the calcs and HMRC wrote to me a couple of days later with ways to pay.  

SiliconChip

Keep_pedalling said:

How did you value the property?

It was done by the local estate agent who sells around 90% of the properties in the town. Their valuation was the same as the figure my sister, who lives in the same town, thought it would be.

SiliconChip

thegreenone said:

I did CGT online a couple of weeks ago and believe me, if I can do it, anyone can!   

The solicitor sent me a breakdown of money received, their fees and EA fees.

Probate value: £350k.  Sold for £375k.  Fees approx. 6k = £1725.25 CGT payable.  Website did the calcs and HMRC wrote to me a couple of days later with ways to pay.  

Thanks for the personal experience, I've done many tax returns over the years and it sounds like this process is easier than that so I'm pretty sure I'll be able to do it myself.

thegreenone

@SiliconChip (@Hal17)

It was surprisingly easy.  I also scanned and added the solicitors Statement of Account, just in case, but the letter arrived stating the same figure.

Hal17

Thanks everyone, sorry to add to the thread but that was extremely helpful. Appreciate the input.

I understand that as an executor you have a CGT allowance of £12,300 that you can use to offset against any CGT due?

Would you know if I have read this correctly? My understanding would be that any Capital gains is taxed at 28%, less the selling expenses and less the CGT allowance of £12,300 to leave the balance that would need to be paid?

SiliconChip

Hal17 said:

Thanks everyone, sorry to add to the thread but that was extremely helpful. Appreciate the input.

I understand that as an executor you have a CGT allowance of £12,300 that you can use to offset against any CGT due?

Would you know if I have read this correctly? My understanding would be that any Capital gains is taxed at 28%, less the selling expenses and less the CGT allowance of £12,300 to leave the balance that would need to be paid?

If you look to the top of the thread you'll see that I asked exactly the same in my question 1. There hasn't been a definitive answer to it, and there has been some debate on the rate that applies, so hopefully somebody who has gone through the process (for instance, @thegreenone) could offer an answer.