CGT on sale of shares (proceeds being split)

rnem170

My brother has just sold some shares which has belonged to my mother's estate.  We are joint executors and we have a question about CGT.   The shares have luckily gone up in value since she died and we are therefore unsure what happens with CGT.  Will it be liable?  Or if it is directly related to the estate it is allowed not to declare if there was headroom in the IHT limits?

If the proceeds of the sale are being split, how does that work, as for me, it's over the 3k gift amount.  Is there any limit for how long you can take to attribute any transactions to will execution?

tetrarch

Short answer is yes - the estate is liable to CGT - (and dividend tax and income tax), but the estate also has annual limits and exemptions for both of the two years allowed

There is no "gift" here as this is an estate distribution. If there is a changing of the beneficiary split then that can be dealt with by a Deed of Variation. There is no need to pay for one of these - you can do it yourselves

There is a comprehensive and extremely readable explanation here:

https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

Regards

Tet 

poseidon1

tetrarch said:

Short answer is yes - the estate is liable to CGT - (and dividend tax and income tax), but the estate also has annual limits and exemptions for both of the two years allowed

There is no "gift" here as this is an estate distribution. If there is a changing of the beneficiary split then that can be dealt with by a Deed of Variation. There is no need to pay for one of these - you can do it yourselves

There is a comprehensive and extremely readable explanation here:

https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

Regards

Tet 

This is indeed good estate tax guidance material from LITRG for the OP and others dealing with estate administration taxation on a DIY basis.

Particularly useful that the article flags the necessity for R185s to be issued to beneficiaries for them to self report taxed estate income flowing through to them. I am certain this is  overlooked by many DIY estate adminstrators time and time again.

Keep_pedalling

The estate gets a £3000 annual allowance for CGT so if the gain is over that amount then yes CGT is due unless you have any assets that sell at a loss to offset that gain. IHT does not come into it as it is the value at the time of day that is appropriate for that. 

Do you have a property to sell as well? 

poseidon1

Keep_pedalling said:

The estate gets a £3000 annual allowance for CGT so if the gain is over that amount then yes CGT is due unless you have any assets that sell at a loss to offset that gain. IHT does not come into it as it is the value at the time of day that is appropriate for that. 

Do you have a property to sell as well? 

However just to be absolutely clear, the estate cgt exemption subsists for the tax year of death and just 2 tax years thereafter.

I note from OPs earlier post his mother died in April 2023, as long as that was  6 April onwards of that year, then this is the last tax year the estate cgt exemption is available.

ColinGala

If the sold share was in an ISA then no CGT is due by the estate

rnem170

Not in an ISA unfortunately.  As she died on 1st April, the +2yrs has expired.  

ColinGala

An ISA can remain open for 3 years after date of death

poseidon1

rnem170 said:

Not in an ISA unfortunately.  As she died on 1st April, the +2yrs has expired.  

Regrettably therefore, by virtue of the date of death, the estate has no further access to a CGT annual exemption.  The estate will have a CGT liability at 24% on the entire net gains but not technically  due and payable until January 2027 via a 2025/26 estate tax return.

However, I am sure you would not wish to delay winding up of the estate admnistration unnecessarily.

 Assuming the estate has received taxable interest and dividends since 1 April 2023, you also have income tax to contend with.  If the total of all estate tax liabilties to date are  below a total of £10k and you are ready to end the estate administration, HMRC do permit lodging an informal report of all estate tax liabilties in letter form via the 'simple estates' process - see HMRC guidance below -

https://www.gov.uk/probate-estate/reporting-the-estate

However, only fair to point out that there are anecdotal stories of severe backlogs and delay in HMRC dealing with informal estate tax reports no doubt due to shortage of staff. The alternative of submitting a formal  SA 900 estate tax return may speed things up although you might find that daunting if you have never completed a self assessment tax return before.

Finally, I would remind you that beneficiaries of estates are also potentially taxable on estate income in the year of distribution, if that income pushes them into the personal higher rate tax bands. The LITRG article is worth reviewing in this regard.