Capital Gains Tax

pinky1978

I was left my parents bungalow in my Dads Will (Aug 2022). I was going to sell it but due to ongoing health issues I decided it would be better to move into it as I was having difficulty managing the stairs in our own property.
We sold the house we have lived in for the last 21 years in November 2024 having moved into the bungalow in July 2024. From the proceeds we had to pay off our mortgage and a sizeable Equity release there had been on the bungalow.
Our solicitor contacted me yesterday to say JUST had (finally) discharged the security on the property and I needed to get in touch to arrange putting the title into my name and settling the Capital Gains liability.
It sent me into a mad panic as we don’t have much money left after paying off all the debts and I didn’t think I would have to pay CGT as the property was never sold so no gain was made.
I would be so very, very grateful if someone could help me and tell me if CGT does need to be paid.
Thank you so much, any help would be so very much appreciated. 

Hoenir

The property remained that of the Estate until you legally transferred it into your own names. CGT is due on the difference between the value at probate and when you transferred it into your own names. 

DE_612183

Doubt there is any CGT the property became yours in November 2024 - so you have not owned the property for any length of time, therefore the value could not have increased.

Had the property passed to you in 2022 and two years later you moved in then, I think you could be subject to CGT - but whether there would anything to pay I doubt.

I would have thought the solicitor is just making you aware of the situation...

https://www.gov.uk/tax-sell-property/work-out-your-gain

sheramber

DE_612183 said:

Doubt there is any CGT the property became yours in November 2024 - so you have not owned the property for any length of time, therefore the value could not have increased.

Had the property passed to you in 2022 and two years later you moved in then, I think you could be subject to CGT - but whether there would anything to pay I doubt.

I would have thought the solicitor is just making you aware of the situation...

https://www.gov.uk/tax-sell-property/work-out-your-gain

 The estate is liable for any CGT  arising for the period  until the house transfers to the OP. 

Payment is due out of  the  estate assets. If the OP is sole beneficiary and has received  them  then he is liable for the payment. 

Hoenir

DE_612183 said:

Doubt there is any CGT the property became yours in November 2024 - so you have not owned the property for any length of time, therefore the value could not have increased.

The Estate continued to own the property from August 2022 to November 2024. 

pinky1978

sheramber said:

DE_612183 said:

Doubt there is any CGT the property became yours in November 2024 - so you have not owned the property for any length of time, therefore the value could not have increased.

Had the property passed to you in 2022 and two years later you moved in then, I think you could be subject to CGT - but whether there would anything to pay I doubt.

I would have thought the solicitor is just making you aware of the situation...

https://www.gov.uk/tax-sell-property/work-out-your-gain

 The estate is liable for any CGT  arising for the period  until the house transfers to the OP. 

Payment is due out of  the  estate assets. If the OP is sole beneficiary and has received  them  then he is liable for the payment. 

Sorry but I’m still totally confused, why is the Estate liable for CGT ? Liability for Inheritance Tax on an Estate I understand if it is worth over a certain amount, but how is it liable for Capital Gains Tax when the property has never been sold ? The Estate unfortunately has no other assets, only debts. Thanks.

Bookworm105

pinky1978 said:

sheramber said:

DE_612183 said:

Doubt there is any CGT the property became yours in November 2024 - so you have not owned the property for any length of time, therefore the value could not have increased.

Had the property passed to you in 2022 and two years later you moved in then, I think you could be subject to CGT - but whether there would anything to pay I doubt.

I would have thought the solicitor is just making you aware of the situation...

https://www.gov.uk/tax-sell-property/work-out-your-gain

 The estate is liable for any CGT  arising for the period  until the house transfers to the OP. 

Payment is due out of  the  estate assets. If the OP is sole beneficiary and has received  them  then he is liable for the payment. 

Sorry but I’m still totally confused, why is the Estate liable for CGT ? Liability for Inheritance Tax on an Estate I understand if it is worth over a certain amount, but how is it liable for Capital Gains Tax when the property has never been sold ? The Estate unfortunately has no other assets, only debts. Thanks.

going by what you say 

1 The estate did not dispose of the property by selling it therefore CGT has not been triggered for the estate 

2. We assume the will specifically left the property to the OP and therefore as beneficiary of that will the OP becomes the beneficial owner of the property from date of death irrespective of the fact that legal ownership remained in the name of the estate until subsequent transfer into OP's name.

3. CGT is based upon beneficial ownership, not legal ownership 
CG70230 - Land: legal and beneficial interests in land - HMRC internal manual - GOV.UK

4, OP therefore became liable for CGT on the property from date of death in 2022. 

5 Between 2022 to 2024 OP did not reside in the property as their main home and therefore that period of time incurs a CGT liability 

6. OP now owns and resides in the inherited property and has not sold it. Therefore OP has not actually triggered CGT for themselves at this time. 

7. At a future date OP may sell the property and at that time CGT will be triggered with the tax being based on the normal split between % of time owned and lived in (exempt) and % of time owned but not lived in (liable - currently some 2 years)

summary
No disposal has taken place which triggers CGT being payable at this time, but it may be payable in the future.
Sounds like the solicitor is making a generic warning without applying the actual facts 

pinky1978

Bookworm105 said:

pinky1978 said:

sheramber said:

DE_612183 said:

Doubt there is any CGT the property became yours in November 2024 - so you have not owned the property for any length of time, therefore the value could not have increased.

Had the property passed to you in 2022 and two years later you moved in then, I think you could be subject to CGT - but whether there would anything to pay I doubt.

I would have thought the solicitor is just making you aware of the situation...

https://www.gov.uk/tax-sell-property/work-out-your-gain

 The estate is liable for any CGT  arising for the period  until the house transfers to the OP. 

Payment is due out of  the  estate assets. If the OP is sole beneficiary and has received  them  then he is liable for the payment. 

Sorry but I’m still totally confused, why is the Estate liable for CGT ? Liability for Inheritance Tax on an Estate I understand if it is worth over a certain amount, but how is it liable for Capital Gains Tax when the property has never been sold ? The Estate unfortunately has no other assets, only debts. Thanks.

going by what you say 

1 The estate did not dispose of the property by selling it therefore CGT has not been triggered for the estate 

2. We assume the will specifically left the property to the OP and therefore as beneficiary of that will the OP becomes the beneficial owner of the property from date of death irrespective of the fact that legal ownership remained in the name of the estate until subsequent transfer into OP's name.

3. CGT is based upon beneficial ownership, not legal ownership 

4, OP therefore became liable for CGT on the property from date of death in 2022. 

5 Between 2022 to 2024 OP did not reside in the property as their main home and therefore that period of time incurs a CGT liability 

6. OP now owns and resides in the inherited property and has not sold it. Therefore OP has not actually triggered CGT for themselves at this time. 

7. At a future date OP will sell the property and at that time CGT will be triggered with the tax being based on the normal split between % of time owned and lived in (exempt) and % of time owned but not lived in (liable - currently some 2 years)

summary
No disposal has taken place which triggers CGT being payable at this time, but it will be payable in the future.
Sounds like the solicitor is making a generic warning without applying the actual facts 

Thank you so much for your very comprehensive reply bookworm105 that was very kind of you and very much appreciated. When I die and the property is sold how do they calculate what the CGT was for the 2 years I wasn’t living in it. Should I get a valuation done on it now or do I just leave them to do a guesstimate on it when it comes to dealing with my estate after my death. Thank You 

Bookworm105

pinky1978 said:

Thank you so much for your very comprehensive reply bookworm105 that was very kind of you and very much appreciated. When I die and the property is sold how do they calculate what the CGT was for the 2 years I wasn’t living in it. Should I get a valuation done on it now or do I just leave them to do a guesstimate on it when it comes to dealing with my estate after my death. Thank You 

there is no CGT on death
When you die your will executors can sort out whether your estate, including that property, is above the IHT threshold (whatever it is by then) or not. IHT is the tax that matters on death, not CGT. Dead people don't trigger taxable gains.

if you own it until your own death then the period you did not live in it dies with you 

it is also why you should think twice about putting property into your children's names whilst you are still alive. It can land them with CGT when they come to sell it (if they do not themselves live in it) as CGT would not exist if they simply inherited it on your death. Sometimes called double tax whammy as the children end up paying both CGT and IHT when the property is finally sold by them because parents did not take proper tax planning advice..

pinky1978

Bookworm105 said:

pinky1978 said:

Thank you so much for your very comprehensive reply bookworm105 that was very kind of you and very much appreciated. When I die and the property is sold how do they calculate what the CGT was for the 2 years I wasn’t living in it. Should I get a valuation done on it now or do I just leave them to do a guesstimate on it when it comes to dealing with my estate after my death. Thank You 

there is no CGT on death
When you die your will executors can sort out whether your estate, including that property, is above the IHT threshold (whatever it is by then) or not. IHT is the tax that matters on death, not CGT. Dead people don't trigger taxable gains.

if you own it until your own death then the period you did not live in it dies with you 

it is also why you should think twice about putting property into your children's names whilst you are still alive. It can land them with CGT when they come to sell it (if they do not themselves live in it) as CGT would not exist if they simply inherited it on your death. Sometimes called double tax whammy as the children end up paying both CGT and IHT when the property is finally sold by them because parents did not take proper tax planning advice..

Thank you so much again Bookworm105. As I don’t have any children whatever is left after all debts are settled will be going to various Charities. So glad to hear I don’t need to pay anything at the moment as I was in a mad panic after I received the email from the Solicitor. I hope your name is a reflection of what you actually are, a Bookworm. I have three passions in life, gardening, animals and books. Reading is one of the greatest pleasures solitude can afford you with books being the quietest and constant of friends, the most accessible and wisest of counsellors and the most patient of teachers. For me a house without books is like a room without windows. 

Bookworm105

pinky1978 said:

Should I get a valuation done on it now or do I just leave them to do a guesstimate on it when it comes to dealing with my estate after my death. Thank You 

a valuation is pointless as it has already got a value for probate

If you ever sell (while still alive) the £ gain is the difference between the value at date of inheritance (probate value) and the amount you sell it for 
that £ gain is then split into % exempt and % liable 

I assume no inheritance tax has been paid so, technically, has not formally accepted the probate value for CGT purposes. If you sell and submit the CGT tax return, HMRC will at that time check its own records of property values in 2022 (Valuation Office Agency is an arm of HMRC) and may, or may not, accept the value you used for probate.

If they don't, you are of course free to argue with them using whatever evidence you can gather of values for identical houses back in 2022. If the difference justifies the cost, often better to employ a professional valuer experienced in such matters (RICS Chartered Surveyor additionally holding the valuation qualification)

(and yes, book reading is a daily pleasure)