CGT on probate house

snowmen

Hi,
With the announcement last week around the annual exemption amounts for capital gains tax being reduced from £12300 to £6000 from 6th April 2023 and then to £3000 from 6th April 2024 I have a question around when this applies to a probate property ...
If the death was this financial year but the property was subsequently sold next financial year which exemption rate would apply for CGT purposes?

shiraz99

You have the allowance for each tax year you have the property for. So if the death was, for example in March this year, and you sold the property in Jun 2023, you'll have the allowance for 2021/22, 22/23 and 23/24 tax years.

snowmen

shiraz99 said:

You have the allowance for each tax year you have the property for. So if the death was, for example in March this year, and you sold the property in Jun 2023, you'll have the allowance for 2021/22, 22/23 and 23/24 tax years.

Thanks for the reply!
So the allowances from year to year accumulate? Interesting.
Is there a maximum to the number of years this can happen? - although you would want to sell promptly in most cases I would expect.

Marcon

snowmen said:

shiraz99 said:

You have the allowance for each tax year you have the property for. So if the death was, for example in March this year, and you sold the property in Jun 2023, you'll have the allowance for 2021/22, 22/23 and 23/24 tax years.

Thanks for the reply!
So the allowances from year to year accumulate? Interesting.
Is there a maximum to the number of years this can happen? - although you would want to sell promptly in most cases I would expect.

Yes - year of death + following two tax years, as shiraz has said.

See https://taxscouts.com/the-tax-basics/what-capital-gains-tax-is-payable-by-executors/ which gives a good, up to date explanation

Keep_pedalling

shiraz99 said:

You have the allowance for each tax year you have the property for. So if the death was, for example in March this year, and you sold the property in Jun 2023, you'll have the allowance for 2021/22, 22/23 and 23/24 tax years.

CGT allowances can’t be carried over you only get the allowance for the year the asset is sold.

snowmen

CGT allowances can’t be carried over you only get the allowance for the year the asset is sold.

Very interesting.
This could be quite an important point where a probate property is sold after the start of the new tax year where the reduction in CGT allowance takes effect.

Keep_pedalling

snowmen said:

CGT allowances can’t be carried over you only get the allowance for the year the asset is sold.

Very interesting.
This could be quite an important point where a probate property is sold after the start of the new tax year where the reduction in CGT allowance takes effect.

Which is why it is best to get an accurate valuation for probate and, if It does not impact IHT, to go a little on the high side.

shiraz99

Keep_pedalling said:

shiraz99 said:

You have the allowance for each tax year you have the property for. So if the death was, for example in March this year, and you sold the property in Jun 2023, you'll have the allowance for 2021/22, 22/23 and 23/24 tax years.

CGT allowances can’t be carried over you only get the allowance for the year the asset is sold.

Are you sure about that?

uknick

ignore, wrongly posted.

uknick

shiraz99 said:

Keep_pedalling said:

shiraz99 said:

You have the allowance for each tax year you have the property for. So if the death was, for example in March this year, and you sold the property in Jun 2023, you'll have the allowance for 2021/22, 22/23 and 23/24 tax years.

CGT allowances can’t be carried over you only get the allowance for the year the asset is sold.

Are you sure about that?

It is more than a little confusing with regard to the carrying forward of the CGT allowances.  HMRC don't help with their online notes.  But, as this link confirms, allowances don't carry forward year on year.

How does the personal representative deal with the income and capital gains arising after the deceased’s death? | Low Incomes Tax Reform Group (litrg.org.uk)

"What tax is payable on the gains arising during the period of administration?

During the period of administration, capital gains tax (CGT) applies to gains on any assets disposed of by the estate except for assets transferred to the beneficiaries. You can read above on when any gains need to be reported to HMRC. Personal representatives might need to dispose of assets to release money to pay debts, for example. Gains arising on the disposal of any assets are calculated by reference to the sales proceeds less the value at death.

Personal representatives get a full annual exemption amount (£12,300 for 2022/23) for the period from the date of death to the following 5 April (no matter how short this period is).

To the extent the administration period continues into the next two tax years, the personal representatives will also receive the full amount of the annual exemption in each of the following two tax years. If the administration period lasts longer than this, no further annual exempt amount is available. The annual exemption is only available to set against gains realised in a particular tax year, any unused annual exemption does not roll over to the following tax year."

I will stand corrected though if someone can point to the legislation overriding the usual rules on carrying unused allowances forward.

Keep_pedalling

You can only use the allowance for 3 consecutive years if you have gains on disposals in each year. So for instance if in the first year you sold shares a rental property in year two, and the main home in year three.

I agree the the gov pages can be horribly confusing which is why for instance so many people think you get taper relief on gifts under the NRB.