Probate Property Valuation and CGT

shimmerinlights

Hi,

I wonder if anyone could help with my understanding of the relationship between IHT and CGT: 

If the probate valuation of a property falls below the IHT threshold of £500,00 (one person’s allowance), and for example is £400,000, but is then sold a year later for £500,00, is Capital Gains Tax due on the £100,000 extra? Or, because the increased value still didn’t exceed the £500,000 IHT threshold, does the increased value still benefit from the IHT threshold as it still didn’t exceed £500,000? 

Many thanks. 

Keep_pedalling

CGT will apply which is why you should not undervalue property when you are well under the IHT exemptions and if anything go in on the high side. Under current market conditions I would thing a 25% gain in one year unlikely.

shimmerinlights

Thanks Keep Pedalling. I suspected that might be the case. 

km1500

or you could just submit a 'correction of probate' form and not pay any cgt

https://www.financialadvice.net/what_happens_when_property_sells_for_more_than_probate_valuation/video/1969/18

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

tigermark119

Re the previous post that km1500 has kindly posted. Would appreciate some clarification if possible please? I have a very similar situation to that mentioned previously; namely the probate valuation was probably too low- with a very good offer being subsequently made for the estate. In short, if I had waited another month before submitting the application, I would have put a higher figure. Advice so far, on an HMRC forum, is that the probate valuation should be amended BEFORE the CGT return is submitted. But how is this actually done? The C4 form in the link mentions IHT 400. IHT is not an issue in my case as it is below the threshold- so no need to complete a 400. The other factor in this is that I do not want to inject anymore delay to the Probate application process, as it is bad enough as it is already. Any advice you can give would be greatly appreciated.

Keep_pedalling

tigermark119 said:

Re the previous post that km1500 has kindly posted. Would appreciate some clarification if possible please? I have a very similar situation to that mentioned previously; namely the probate valuation was probably too low- with a very good offer being subsequently made for the estate. In short, if I had waited another month before submitting the application, I would have put a higher figure. Advice so far, on an HMRC forum, is that the probate valuation should be amended BEFORE the CGT return is submitted. But how is this actually done? The C4 form in the link mentions IHT 400. IHT is not an issue in my case as it is below the threshold- so no need to complete a 400. The other factor in this is that I do not want to inject anymore delay to the Probate application process, as it is bad enough as it is already. Any advice you can give would be greatly appreciated.

The links provided by km1500 are not applicable to estates with no IHT liability so are not appropriate to this situation. Once probate / confirmation is granted it would appear you are stuck with valuations as far as CGT is concerned.

https://www.accountingweb.co.uk/any-answers/increasing-iht-value-of-property-to-save-cgt

https://www.step.org/industry-news/executors-cannot-claim-property-sales-above-probate-value

In your case it may be possible to alter the valuation if confirmation is still not complete but I have no idea on how you do that.

tigermark119

Thank you, much appreciated.