CGT payable on inheritance of property and subsequent sale higher than probate value

Mikey2k24

I think this is quite simple and i'm really just hoping to get confirmation of the action required. 

We have 3 beneficiaries and a deed of Appropriation was completed that notes the proportion each beneficiary was entitled to which I believe allows us each a £3000 allowance against CGT. Property sold July this year.
  
The property made £40k more than the probate amount net of any selling costs.

I believe we have to tell HMRC of the capital gain for each of us within 60 days of selling the property.

So i'm guessing that each of our capital gains liability will be the net sale price, less the probate value, divided by the proportion each of us will receive of the proceeds.

Is this correct?

Then each of us will have to look at our own allowances and earnings to work out if the CGT is payable, or how much. For example: one of us has paid no tax for the last year as has been living off savings and a few ebay, vinted sales of personal possessions. They're wondering if the CGT payable is less than their tax free amount how do they inform HMRC of their CGT liability without having to pay the tax if it's less than their yearly tax free amount? 

Hope that makes sense, would appreciate any help. 

Keep_pedalling

Your personal allowance for income tax does not apply to CGT, even if you have zero income it is still payable. See link on how to report and pay.

https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020

Was the estate in or near IHT territory? 

[Deleted User]

Mikey2k24 said:

I think this is quite simple and i'm really just hoping to get confirmation of the action required. 

We have 3 beneficiaries and a deed of Appropriation was completed that notes the proportion each beneficiary was entitled to which I believe allows us each a £3000 allowance against CGT. Property sold July this year.
  
The property made £40k more than the probate amount net of any selling costs.

I believe we have to tell HMRC of the capital gain for each of us within 60 days of selling the property.

So i'm guessing that each of our capital gains liability will be the net sale price, less the probate value, divided by the proportion each of us will receive of the proceeds.

Is this correct?

Then each of us will have to look at our own allowances and earnings to work out if the CGT is payable, or how much. For example: one of us has paid no tax for the last year as has been living off savings and a few ebay, vinted sales of personal possessions. They're wondering if the CGT payable is less than their tax free amount how do they inform HMRC of their CGT liability without having to pay the tax if it's less than their yearly tax free amount? 

Hope that makes sense, would appreciate any help. 

If their individual gain is more than £3000 CGT is payable. Their other income will determine the rate at which the gain is chargeable, not whether it is payable.

Mikey2k24

Keep_pedalling said:

Your personal allowance for income tax does not apply to CGT, even if you have zero income it is still payable. See link on how to report and pay.

https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020

Was the estate in or near IHT territory? 

Thank you. It was under IHT by 250k taking into account allowances from both Parents: this confirmed by our solicitor and on the Probate application. Does that make a difference? Thanks

Bookworm105

Mikey2k24 said:

Keep_pedalling said:

Your personal allowance for income tax does not apply to CGT, even if you have zero income it is still payable. See link on how to report and pay.

https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020

Was the estate in or near IHT territory? 

Thank you. It was under IHT by 250k taking into account allowances from both Parents: this confirmed by our solicitor and on the Probate application. Does that make a difference? Thanks

it means that as no IHT has been paid you are now unable to substitute the sale price for the probate value that was  used in the IHT calculation
IHTM33026 - Loss on sale of land: procedures: claims to substitute a higher sale value within three years of death - HMRC internal manual - GOV.UK (www.gov.uk)

therefore your situation remains as before: 3 equal share owners, 40k total gain (net of costs) 

each person must declare and pay CGT on their respective share 13,333 less their CGT personal allowance 3,000 = 10,333 net taxable gain each, upon which:
- the non (income tax) taxpayer will pay 10,333 x 18% =  1,859 tax
- the other two will pay CGT at 18% and/or 24% depending if the amount of the gain takes their respective "total income" over the £50,270 threshold.
If it does, they would pay 24% on the amount over that threshold with the rest at 18%. If it does not, then they will pay all @ 18%

 50,270 threshold  =  12,570 (income tax personal allowance) + 37,700 (20% basic rate tax band), ie the point at which you become a higher rate taxpayer, and therefore must pay CGT at the higher rate of CGT 

"total income" = gross income subject to income tax - 12,570 + CGT net taxable gain (10,333) = ?   

Mikey2k24

Wow! Thank you for taking the time to share that knowledge - very much appreciated!!