CGT

Nickyno

If a beneficiary (3 people) sells a deceased person's home, do they need to pay CGT?

Keep_pedalling

Only if they sell it for more than the probate valuation. If that is the case then it is the estate that pays the CGT not the individual beneficiaries. 

Nickyno

On the probate found we put down the house as being worth £115,000.00 as valued by estate agent.   When they put it on the market they put it for sale at £130,000.00 and they have accepted an offer for £131,000.00.

Keep_pedalling

Nickyno said:

On the probate found we put down the house as being worth £115,000.00 as valued by estate agent.   When they put it on the market they put it for sale at £130,000.00 and they have accepted an offer for £131,000.00.

So the gain is £16,000 (presuming nothing goes wrong) from that you can deduct the £3,000 annual allowance and the selling costs.

Keep_pedalling

I would be a bit peed off with that original valuation, the EA may have though a low valuation might be useful for IHT purposes but where the estate value is way below IHT levels it is always best to go on the high side to avoid CGT.

Nickyno

Keep_pedalling said:

Nickyno said:

On the probate found we put down the house as being worth £115,000.00 as valued by estate agent.   When they put it on the market they put it for sale at £130,000.00 and they have accepted an offer for £131,000.00.

So the gain is £16,000 (presuming nothing goes wrong) from that you can deduct the £3,000 annual allowance and the selling costs.

On the letter of administration it says "the application has stated that the gross value of the estate is £125,000 and the net value is £120,000"

Selling  cost for  EA is £1400+vat (I think) and they also have a solicitor for the sale are these  costs deductible from the profit?
The estate deducts £3000 annual allowance
What rate of CTG is payable?

What would the CTG due be? 

Where and when do they need to pay it?

poseidon1

If the house proceeds were not required for any outstanding estate liabilities, it could have been 'Assented' in favour of the three beneficiaries ( a simple legal document), with the resulting sale treated as made by the beneficiaries rather than the estate.

This would have brought into play 3 CGT exemptions of £3000 each ( total £9000) , rather than the single exemption accorded to the estate ( I am assuming none of the beneficiaries would have reason to use their respective cgt exemptions  for the balance of the tax year ).

If there has been no exchange of contracts for the sale as yet, may still be time to put the Assent in place to use the exemptions ( speak to the conveyancing solicitor on this ).

After deducting selling costs and the estate cgt exemption , tax would be levied at 28% on the net gain and is payable within 60 days of completion date.

However the further potential  benefit of an Assent in favour of the beneficiaries, is CGT on residential property is reduced to 18% where the beneficiary is a basic rate income tax payer.

As for compliance, ordinarily HMRC require the return to be lodged digitally via a ' Capital Gains Tax on UK property Account'.  However, if you plan to utilise the Assent route to multiply available cgt exemptions and potentially reduce the CGT rate to 18%, might make sense to request a paper return to accompany the Assent, to explain the claim of 3 exemptions on a single return.

Cazzaloulou68

The rate you have quoted as 28% for capital gains tax. If you are an executor (personal representative) i thought it was 24% CGT for property.
That’s the figure ive been basing my CGT on. Am i wrong?

Keep_pedalling

Cazzaloulou68 said:

The rate you have quoted as 28% for capital gains tax. If you are an executor (personal representative) i thought it was 24% CGT for property.
That’s the figure ive been basing my CGT on. Am i wrong?

You are correct the rate changed in April.

https://www.gov.uk/guidance/capital-gains-tax-rates-and-allowances

Nickyno

I must admit this is going over my head. 😔

Can someone explain it clearer?

The lady died without a will. (Are they right in thinking everything would be left and divided between her 3 children as the ladies husband died many years ago). They did the probate/letters of administration themselves, with the house and belongings (estate totalling £125,000 gross and £120,000 net after funeral expenses). 

Keep_pedalling

Have contracts already been exchanged?