CGT on Inherited Property

shimmerinlights

Hi, 

I wonder if anyone could advise in regard to CGT on an increase in the value of an inherited property, and how to calculate the amount of CGT if a person is self employed.  

I understand that CGT will be payable on any increase between the probate and end sale value. However the rate of CGT is determined by one's own personal income tax situation. As CGT has to be paid within sixty days of the sale, from what tax year (if at all) does one calculate the CGT if one is self employed? Say for example the property is sold on May 1st 2024, this is only one month into the standard Apr-Apr tax year. At this point a self employed person's income would still be fairly low, so how could one calculate the CGT payable? 

I imagine there are four options: 

1) The CGT is calculated on just this one month's earnings for that year up to that point and that amount is final?

2) The CGT is calculated on the earnings up to that point for the tax year it is sold in, but at the end of that tax year, any adjustments that are necessary are made. I.e if you then (inevitably)  earn more money later in the year, the CGT amount would be changed at the end of the year to reflect this?

3) It could be calculated on the earnings for the previous twelve months from the point of sale, regardless of the formal tax year, for example May 23-May 24? 

4) It could be calculated by the most recent full tax year accounts, for example Apr23- Apr24?

Any help would be greatly appreciated. 

Thanks.

poppystar

AIUI - CGT needs to be paid within 60 days not six months of the sale. 

RAS

It's a bit more complicated than that.

The estate pays CGT on the increase in value between the date of probate and sale. Assuming no-one has transferred the property from the estate to the beneficiaries.

As a general rule, the executors don't transfer property to the beneficiaries

1) It means an extra lot of legal fees to fund the transfer
2) Some mortgage providers won't fund a purchase when the house has changed ownership in the previous 6months, so this can delay the sale.
3) Any beneficiary who doesn't own a home loses their First Time Buyer status.

Normally the sale is managed by the executors and the legal folk will transfer the net portion in accordance with the will, or to the executors who transfer the net funds after paying any outstanding bills first.

If the sale takes place by April 2024, there is £6k disregard, as well.

shimmerinlights

Thanks for your response Ras. 

I can see from what you say it's a lot more complicated.

However when you say 'the estate pays CGT' at what rate would this be? It's my understanding that the amount of CGT paid on inherited property is linked to one's personal income tax, yet 'the estate' doesn't have this? 

But also I am both the executor and one of two beneficiaries. There are two options; one is we sell the property and spilt the sale amount, the other is I buy out the other beneficiary and move into the property. 
Do you know anything about these scenarios? 

Many thanks. 

Keep_pedalling

shimmerinlights said:

Thanks for your response Ras. 

I can see from what you say it's a lot more complicated.

However when you say 'the estate pays CGT' at what rate would this be? It's my understanding that the amount of CGT paid on inherited property is linked to one's personal income tax, yet 'the estate' doesn't have this? 

But also I am both the executor and one of two beneficiaries. There are two options; one is we sell the property and spilt the sale amount, the other is I buy out the other beneficiary and move into the property. 
Do you know anything about these scenarios? 

Many thanks. 

Estates pay a CGT of 28%. If you buy out your siblings share from the estate you, as executor will need to pay 28% of 50% of the gain. And reduce the payment to your sibling by the amount of tax payed. You won’t have a CGT liability as your share is not being sold, but you may have stamp duty to pay.