Tax liability on a second property IHT and /or Capital Gains tax

pennyunwise

If a second (rental) property is left in a will and the beneficiaries decide to sell the property before probate are they liable for capital gains tax?

I assume the property sale proceeds would then be added to the total estate value and IHT would need to be paid if the value of the total estate incurred IHT.

if the property was kept and transferred to the beneficiaries, I assume the beneficiaries would be liable to capital gains tax when it was sold in the future.

I am trying to understand if the property could be liable for both IHT and capital gains as part of the estate, and when these would need to be paid.

if anyone can explain I’d be grateful.
Thank you

Olinda99

how would they sell the property before probate ?

Keep_pedalling

CGT would only be due on a gain in value between the value at the time of death and the sale price. It the house had a significant gain in that short period HMRC might challenge the original valuation and apply IHT instead of CGT, but you won’t pay both.

As abov3 yo7 can’t sell until you have probate.

p00hsticks

The executor won't be able to complete the sale of the property before probate is obtained, as it is that that givens them the authority to do so. 

The property needs to be valued as at the date of death, and it is this value that is used in IHT calculations. 

If and when the property is later sold, either by the executor on behalf of the estate or by beneficaries after has been transferred into their names, then CGT is potentially due on any gain between the value at death as used for IHT and the eventual sale value. 

The estate has it's own £3k CGT allowance 

pennyunwise

p00hsticks said:

The executor won't be able to complete the sale of the property before probate is obtained, as it is that that givens them the authority to do so. 

The property needs to be valued as at the date of death, and it is this value that is used in IHT calculations. 

If and when the property is later sold, either by the executor on behalf of the estate or by beneficaries after has been transferred into their names, then CGT is potentially due on any gain between the value at death as used for IHT and the eventual sale value. 

The estate has it's own £3k CGT allowance 

If the property was left to say 2 or 3 beneficiaries (who become joint owners) after probate, would each be liable for their share of any Capital gains tax at the point of sale. At this time presumably the capital gains would based on any increased value since the probate value.

Keep_pedalling

pennyunwise said:

p00hsticks said:

The executor won't be able to complete the sale of the property before probate is obtained, as it is that that givens them the authority to do so. 

The property needs to be valued as at the date of death, and it is this value that is used in IHT calculations. 

If and when the property is later sold, either by the executor on behalf of the estate or by beneficaries after has been transferred into their names, then CGT is potentially due on any gain between the value at death as used for IHT and the eventual sale value. 

The estate has it's own £3k CGT allowance 

If the property was left to say 2 or 3 beneficiaries (who become joint owners) after probate, would each be liable for their share of any Capital gains tax at the point of sale. At this time presumably the capital gains would based on any increased value since the probate value.

Only if the property had been assigned to them, otherwise the estate is responsable. 

p00hsticks

pennyunwise said:

p00hsticks said:

The executor won't be able to complete the sale of the property before probate is obtained, as it is that that givens them the authority to do so. 

The property needs to be valued as at the date of death, and it is this value that is used in IHT calculations. 

If and when the property is later sold, either by the executor on behalf of the estate or by beneficaries after has been transferred into their names, then CGT is potentially due on any gain between the value at death as used for IHT and the eventual sale value. 

The estate has it's own £3k CGT allowance 

If the property was left to say 2 or 3 beneficiaries (who become joint owners) after probate, would each be liable for their share of any Capital gains tax at the point of sale. At this time presumably the capital gains would based on any increased value since the probate value.

Does the will specifically leave that property to those beneficiaries ? (it's not usually recommended that specific properties are mentioned in wills in case they are sold before the person dies and the original intentions at the time of writing the will cannot therefore be carried out).

Even if it does, if the intention is to sell it straight away it's usually far simpler to leave it in the name of the deceased, let the executor sell it and then give the proceeds of the sale to the beneficiaries. It does mean that if the property has risen there may be a bit more CGT to pay though, as the estate only has one CGT allowance, whereas if transferred to more than one beneficiary they may each be able to use their own for their share of the property.