Inheritance Tax - date of death 2004

Samantha99

Hi all. I’d be very grateful if anyone can help.

My father died in 2004. He was the sole owner of a house. His will stated that his surviving partner had the right to reside in the property for their lifetime.

Fast forward to 2021 and that partner has now died.  My father’s will, written in 2002, holds myself and my siblings as the ultimate beneficiaries of his estate.

My late father’s house valued in 2004 for probate purposes at £106,000 has now been sold for £420,000. 

Will inheritance tax be calculated at the valuation for probate in 2004? Or will the inheritance tax be calculated at today’s sold value? 

I’ve read as much as I can re inheritance tax on the Government’s guidance, but it is very confusing and I’m just not smart enough. 

One more question please: as my father’s house has been held in a Trust since his death, does that change the ‘rules’ for inheritance tax purposes? I tried to understand the rules around Trusts but I just don’t get it.

Of course the Executor and Trustee will be dealing with this, but not sure how competent they are. In order to double check their calculations, I’d really appreciate it if anyone can help me to understand what tax may be due on my father’s estate. 

[Deleted User]

As I understand it (far from an expert and happy to be proved wrong), the beneficiaries will be liable for GCT on the difference between current value and that at the time of probate valuation.
£420,000 - £106,000 = £314,000 liable to CGT

Inheritance tax, if applicable would have been paid at the time of probate.

Keep_pedalling

Your father died 2 years before the rules on IHT on immediate post-death interest changed at the time of death his estate would have been responsible for any IHT due and the value of the house would have used up part of his NRB.

The issue now is CGT.

Was he married to his partner? 

Samantha99

Thanks for your replies. I hadn’t thought about CGT. No, he wasn’t married to his partner but his partner does have a ‘share’ in the house of 15%. So the sale proceeds will be split between four of us. 

Keep_pedalling

Samantha99 said:

Thanks for your replies. I hadn’t thought about CGT. No, he wasn’t married to his partner but his partner does have a ‘share’ in the house of 15%. So the sale proceeds will be split between four of us. 

That 15% share will not be subject to CGT as it forms part of her estate, the rest I am pretty sure does but I think that you will be able to reduce this with the use of 4 annual allowances. I would take professional advice on this as few of us here are tax experts and we don’t have visibility of the terms of the trust set up by your father’s will.

msb1234

This might help you calculate what CGT youre de to pay.
https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/