CGT following a house sale - questions

What_time_is_it

We have completed on a house sale this week. The sale price ended up higher than the probate price so I guess we have to pay CGT on the difference. 2 questions:

1. Is CGT paid individually? The house was jointly inherited by my partner and her brother. Do they each complete a form? Using 50% values?

2. It looks like CGT is due within 60 days. But as the rate is going to be cut from 28% to 24% from April 6th, would it make sense to wait until after then?

Thanks!

JGB1955

1) Was the house sold by the executors (in which case the estate pays the CGT) or had it been transferred into your own names (in which case you will each have to pay CGT)?
2) Rate is based on date of completion.

What_time_is_it

JGB1955 said:

1) Was the house sold by the executors (in which case the estate pays the CGT) or had it been transferred into your own names (in which case you will each have to pay CGT)?
2) Rate is based on date of completion.

The house was sold by the executors (my partner and her brother). He is a higher rate taxpayer, my partner is not. Does that make a difference?

When I've looked at the CGT calculator on the HMRC website, it looks like you only calculate the tax based on your own individual share and your own circumstances? Is that correct?

p00hsticks

What_time_is_it said:

JGB1955 said:

1) Was the house sold by the executors (in which case the estate pays the CGT) or had it been transferred into your own names (in which case you will each have to pay CGT)?
2) Rate is based on date of completion.

The house was sold by the executors (my partner and her brother). He is a higher rate taxpayer, my partner is not. Does that make a difference?

When I've looked at the CGT calculator on the HMRC website, it looks like you only calculate the tax based on your own individual share and your own circumstances? Is that correct?

As I understand it....

 Assuming that you sold it within three tax years of the death (the year in which the death occurred and the two following tax years) then the estate has its own CGT allowance. As you indicate that it is the estate (via the executors) selling the property then you need to calculate the CGT on the whole of the difference between the probate value and the eventual sale value (less selling costs etc). I think that the higher rate of 28% applies in these circumstances, but hope that someone can confirm or correct me.    

The way the proceeds are going to be split between beneficiaries and their personal tax circumstances are immaterial if the property has not been transferred into their names prior to the sale, as it's not legally them selling the property.  Nor do the personal circumstances of the executors come into it.  

sheramber

JamesRobinson48 said:

JGB1955 said:

1) Was the house sold by the executors (in which case the estate pays the CGT) or had it been transferred into your own names (in which case you will each have to pay CGT)?
2) Rate is based on date of completion.

Please, what is your source for "Rate is based on date of completion"?

HMRC's Capital Gains Tax Manual (section CG14260) indicates that for CGT purposes the transaction is deemed to take place when contracts are exchanged, not at completion.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14260

Separately, in the case of disposals of UK residential properties, there is a requirement to report the transaction to HMRC and pay the tax within 60 days of completion. But despite that, since the transaction is deemed to take place upon exchange of contracts, I believe the applicable % tax rate would be that in force upon exchange (not completion).

I'm not an expert, but I am genuinely curious as I have a property disposal that will straddle the tax year end.

What date did you exchange contracts?

This is the disposal date. The contract exchange date is usually when the buyer and seller exchange contracts and is usually when the new owner pays a deposit.

The tax year of exchange is the tax year that the disposal is chargeable in, even if completion of the contract occurs in a later tax year.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg-app18-230#:~:text=The contract exchange date is,in a later tax year.

Jeremy535897

The first question to ask is whether the house was sold by the executors as executors, or whether the house was sold by the legatees. See:
https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2022
Nowadays exchange and completion typically happen on the same day. If not, exchange is the date of disposal for working out which tax year the disposal falls in, and completion is the relevant date for determining the date by which the online return has to be filed and the tax paid:
https://www.gov.uk/report-and-pay-your-capital-gains-tax
There is a quirk in the legislation regarding the need to pay tax within 60 days of completion where transactions take place shortly before 6 April. See:
https://www.accountingweb.co.uk/any-answers/residential-property-sale-completes-31-march-2024

What_time_is_it

Jeremy535897 said:

The first question to ask is whether the house was sold by the executors as executors, or whether the house was sold by the legatees. See:
https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2022

I can honestly say that I do not understand how to answer this question! I've read the notes in the link you posted above, and I still don't understand what this means! 
How can I tell whether it was sold by executors of legatees? 

sheramber

Was the house transferred to the beneficiaries before the sale?

If not, then it was still in the ownership of the estate and the sale was done by the executors of the estate.

While that person may be the beneficiary who inherits the value of the house, they conducted the sale in their position as executor, not as a beneficiary.

What_time_is_it

So, it sounds like we would need to complete CGT as executors.
Do we calculate this as:

Sale price - Probate valuation
LESS Allowance (£6k)
LESS Estate Agent and Solicitors fees incurred during the sale (about £15k)
LESS any costs incurred in improving the property (£0)

Is that right?