Capital Gains tax on Inheritance?

Discussion in 'UK Finance' started by parham1975@msn.com, Sep 19, 2006.

  1. Guest

    Hello there,
    I wonder if anyone can clarify this situation for me. I recently
    inherited 25% of a house from a relative. The estate is under the
    threshold for inheritance tax. However when the house is sold I will
    recieve ~£40,000 cash and I wonder if this is liable for CGT or is it
    exempt because it is an inheritance?

    Thanks for any help on this!
     
    , Sep 19, 2006
    #1
    1. Advertisements

  2. Miss L. Toe Guest

    <> wrote in message
    news:...
    Hello there,
    I wonder if anyone can clarify this situation for me. I recently
    inherited 25% of a house from a relative. The estate is under the
    threshold for inheritance tax. However when the house is sold I will
    recieve ~£40,000 cash and I wonder if this is liable for CGT or is it
    exempt because it is an inheritance?

    Thanks for any help on this!


    Did you:
    a) Inherit a 25% share from the estate with the house being put in joint
    names and then sold later. (which is what your post implies)
    or
    b) Is the house being sold whilst still in the estate and then you get your
    entitlement as a distribution afterwards. (which is more normal)
     
    Miss L. Toe, Sep 19, 2006
    #2
    1. Advertisements

  3. Guest

    Hi Miss L,
    It's option b - I inherited 25% of the house which as you say was sold
    as part of the estate and then once the estate is settled I will get my
    share.



    Miss L. Toe wrote:
    > <> wrote in message
    > news:...
    > Hello there,
    > I wonder if anyone can clarify this situation for me. I recently
    > inherited 25% of a house from a relative. The estate is under the
    > threshold for inheritance tax. However when the house is sold I will
    > recieve ~£40,000 cash and I wonder if this is liable for CGT or is it
    > exempt because it is an inheritance?
    >
    > Thanks for any help on this!
    >
    >
    > Did you:
    > a) Inherit a 25% share from the estate with the house being put in joint
    > names and then sold later. (which is what your post implies)
    > or
    > b) Is the house being sold whilst still in the estate and then you get your
    > entitlement as a distribution afterwards. (which is more normal)
     
    , Sep 19, 2006
    #3
  4. Miss L. Toe Guest

    <> wrote in message
    news:...
    Hi Miss L,
    It's option b - I inherited 25% of the house which as you say was sold
    as part of the estate and then once the estate is settled I will get my
    share.



    Then (it is my understanding) that CGT does not apply, and all taxes (IHT)
    will be settled by the executors before you get anything.

    (With the minor exception of taxable interest earned on the executors
    account).

    It would be safest to ask the executors if any tax will be due (as long as
    they arent going to charge you a fortune to tell you).


    Miss L. Toe wrote:
    > <> wrote in message
    > news:...
    > Hello there,
    > I wonder if anyone can clarify this situation for me. I recently
    > inherited 25% of a house from a relative. The estate is under the
    > threshold for inheritance tax. However when the house is sold I will
    > recieve ~£40,000 cash and I wonder if this is liable for CGT or is it
    > exempt because it is an inheritance?
    >
    > Thanks for any help on this!
    >
    >
    > Did you:
    > a) Inherit a 25% share from the estate with the house being put in joint
    > names and then sold later. (which is what your post implies)
    > or
    > b) Is the house being sold whilst still in the estate and then you get

    your
    > entitlement as a distribution afterwards. (which is more normal)
     
    Miss L. Toe, Sep 19, 2006
    #4
  5. Guest

    Thanks Miss, from reading posts in this group I was getting the
    impression that was the case but wanted to ask my specfic situation.
    CGT is rather a confusing one to my simple mind!

    Thanks for taking the time to respond!


    Miss L. Toe wrote:
    > <> wrote in message
    > news:...
    > Hi Miss L,
    > It's option b - I inherited 25% of the house which as you say was sold
    > as part of the estate and then once the estate is settled I will get my
    > share.
    >
    >
    >
    > Then (it is my understanding) that CGT does not apply, and all taxes (IHT)
    > will be settled by the executors before you get anything.
    >
    > (With the minor exception of taxable interest earned on the executors
    > account).
    >
    > It would be safest to ask the executors if any tax will be due (as long as
    > they arent going to charge you a fortune to tell you).
    >
    >
    > Miss L. Toe wrote:
    > > <> wrote in message
    > > news:...
    > > Hello there,
    > > I wonder if anyone can clarify this situation for me. I recently
    > > inherited 25% of a house from a relative. The estate is under the
    > > threshold for inheritance tax. However when the house is sold I will
    > > recieve ~£40,000 cash and I wonder if this is liable for CGT or is it
    > > exempt because it is an inheritance?
    > >
    > > Thanks for any help on this!
    > >
    > >
    > > Did you:
    > > a) Inherit a 25% share from the estate with the house being put in joint
    > > names and then sold later. (which is what your post implies)
    > > or
    > > b) Is the house being sold whilst still in the estate and then you get

    > your
    > > entitlement as a distribution afterwards. (which is more normal)
     
    , Sep 19, 2006
    #5
  6. Miss L. Toe wrote:

    >
    > <> wrote in message
    > news:...
    > Hi Miss L,
    > It's option b - I inherited 25% of the house which as you say was sold
    > as part of the estate and then once the estate is settled I will get my
    > share.
    >
    >
    >
    > Then (it is my understanding) that CGT does not apply, and all taxes (IHT)
    > will be settled by the executors before you get anything.


    Had the answer been option (a) then CGT would not have applied either.

    The heir would be treated as having acquired the 25% share at its value
    at date of death. CGT would only apply in respect of gain from the time
    *he* (the heir, not the deceased) acquired it (i.e. from date of death)
    up until when he sold it. Assuming this to be only a short while, and
    assuming that the property's not a manor worth millions, there will be
    too little gain to breach the annual exemption, so unless he is realising
    significant other gains in the same year, he'll be safe.
     
    Ronald Raygun, Sep 19, 2006
    #6
  7. Miss L. Toe Guest

    "Ronald Raygun" <> wrote in message
    news:hZUPg.21547$...
    > Miss L. Toe wrote:
    >
    > >
    > > <> wrote in message
    > > news:...
    > > Hi Miss L,
    > > It's option b - I inherited 25% of the house which as you say was sold
    > > as part of the estate and then once the estate is settled I will get my
    > > share.
    > >
    > >
    > >
    > > Then (it is my understanding) that CGT does not apply, and all taxes

    (IHT)
    > > will be settled by the executors before you get anything.

    >
    > Had the answer been option (a) then CGT would not have applied either.
    >
    > The heir would be treated as having acquired the 25% share at its value
    > at date of death. CGT would only apply in respect of gain from the time
    > *he* (the heir, not the deceased) acquired it (i.e. from date of death)
    > up until when he sold it. Assuming this to be only a short while, and
    > assuming that the property's not a manor worth millions,


    Assumptions are dangerous :)

    > there will be
    > too little gain to breach the annual exemption, so unless he is realising
    > significant other gains in the same year, he'll be safe.


    especially when there are many of them.

    > Had the answer been option (a) then CGT would not have applied either.


    You just listed 3 situations where CGT would/could have applied :)
     
    Miss L. Toe, Sep 19, 2006
    #7
  8. Miss L. Toe wrote:

    > Then (it is my understanding) that CGT does not apply, and all taxes (IHT)
    > will be settled by the executors before you get anything.
    >
    > (With the minor exception of taxable interest earned on the executors
    > account).


    Who pays the income tax on this interest? The estate or the heir?
    I believe it is the heir, but the executors (especially where they
    are money grubbing accountants or lawyers) my offer to deal with this
    aspect on behalf of the heirs (and charge a fortune for it). Where the
    heirs are basic rate taxpayers and the tax on the interest is retained
    at source by the banks, this doesn't actually involve any work (beyond
    establishing the fact that the heirs are indeed BRTPs), but they'll
    still charge a fortune for it.

    I reckon the same is true of CGT, so if one of the the 3 "dangerous
    assumption" situations applies, then I reckon option (b) will not
    avoid CGT liability, either. Where the money grubbing professional
    executors deal with CGT for and on behalf of the heirs, which is now
    less straightforward since they basically have to get involved in the
    heirs' tax affairs, and this will cost an enhanced fortune, then all tax
    due (including CGT) will already have been deducted from the dosh when
    the heirs finally receive it.

    > It would be safest to ask the executors if any tax will be due (as long as
    > they arent going to charge you a fortune to tell you).


    I would think that it would be simpler if the executors did *not* deal
    with CGT for the heirs but were instead simply to distrubute the loot net
    of bank retained basic rate interest income tax and gross of CGT if
    potentially due. The heirs would be left to reclaim interest tax (or
    pay the higher-rate top-up) where applicable, and to make their own
    arrangements for paying the CGT if any.
     
    Ronald Raygun, Sep 19, 2006
    #8
  9. Tumbleweed Guest

    "Ronald Raygun" <> wrote in message
    news:eek:IVPg.21562$...
    > Miss L. Toe wrote:
    >
    >> Then (it is my understanding) that CGT does not apply, and all taxes
    >> (IHT)
    >> will be settled by the executors before you get anything.
    >>
    >> (With the minor exception of taxable interest earned on the executors
    >> account).

    >
    > Who pays the income tax on this interest? The estate or the heir?
    > I believe it is the heir <snip>


    You are incorrect, the estate pays all taxes due (so thats for the executors
    to arrange), then the remaining money is distributed. (just doing this now)

    --
    Tumbleweed

    email replies not necessary but to contact use;
    tumbleweednews at hotmail dot com
     
    Tumbleweed, Sep 19, 2006
    #9
  10. Miss L. Toe Guest

    "Tumbleweed" <> wrote in message
    news:...
    >
    > "Ronald Raygun" <> wrote in message
    > news:eek:IVPg.21562$...
    > > Miss L. Toe wrote:
    > >
    > >> Then (it is my understanding) that CGT does not apply, and all taxes
    > >> (IHT)
    > >> will be settled by the executors before you get anything.
    > >>
    > >> (With the minor exception of taxable interest earned on the executors
    > >> account).

    > >
    > > Who pays the income tax on this interest? The estate or the heir?
    > > I believe it is the heir <snip>

    >
    > You are incorrect, the estate pays all taxes due (so thats for the

    executors
    > to arrange), then the remaining money is distributed. (just doing this

    now)
    >


    I am not an expert but I think you might be not 100% correct.

    My understanding is that the estate pays basic rate (in most cases) tax on
    the interest.

    This might be reclaimable by non-taxpaying residual beneficeries.
    Extra (to make it up to 40%) might be payable by higher tax rate paying
    residual beneficeries.

    Checkout the R185

    Note to the OP if you pay anything other than basic rate tax ask your
    executors for an R185 - the impact (if any) in pounds is likely to be very
    small.
     
    Miss L. Toe, Sep 20, 2006
    #10
  11. Tumbleweed Guest

    "Miss L. Toe" <> wrote in message
    news:45108f41$0$97240$...
    >
    > "Tumbleweed" <> wrote in message
    > news:...
    >>
    >> "Ronald Raygun" <> wrote in message
    >> news:eek:IVPg.21562$...
    >> > Miss L. Toe wrote:
    >> >
    >> >> Then (it is my understanding) that CGT does not apply, and all taxes
    >> >> (IHT)
    >> >> will be settled by the executors before you get anything.
    >> >>
    >> >> (With the minor exception of taxable interest earned on the executors
    >> >> account).
    >> >
    >> > Who pays the income tax on this interest? The estate or the heir?
    >> > I believe it is the heir <snip>

    >>
    >> You are incorrect, the estate pays all taxes due (so thats for the

    > executors
    >> to arrange), then the remaining money is distributed. (just doing this

    > now)
    >>

    >
    > I am not an expert but I think you might be not 100% correct.
    >


    My bad, I read your first sentence, and entirely missed the key point in the
    second one in parethenses, about tax on interest being the point at issue.
    Sorry.

    --
    Tumbleweed

    email replies not necessary but to contact use;
    tumbleweednews at hotmail dot com
     
    Tumbleweed, Sep 20, 2006
    #11
    1. Advertisements

Want to reply to this thread or ask your own question?

It takes just 2 minutes to sign up (and it's free!). Just click the sign up button to choose a username and then you can ask your own questions on the forum.
Similar Threads
  1. Therese G. Maddox

    Capital Gains on Inheritance question

    Therese G. Maddox, Oct 22, 2003, in forum: Tax
    Replies:
    1
    Views:
    570
    Herb Smith
    Oct 24, 2003
  2. Mike Gorund
    Replies:
    4
    Views:
    1,082
    Dave Woods
    Jun 27, 2004
  3. Harry
    Replies:
    0
    Views:
    462
    Harry
    Jan 16, 2005
  4. Replies:
    1
    Views:
    777
    JoeTaxpayer
    Jun 11, 2005
  5. kalanamak
    Replies:
    12
    Views:
    717
    Stuart Bronstein
    Dec 10, 2007
  6. Alasdair Baxter

    Inheritance and Capital Gains Taxes

    Alasdair Baxter, May 20, 2005, in forum: UK Finance
    Replies:
    5
    Views:
    529
    john boyle
    May 22, 2005
  7. Replies:
    23
    Views:
    1,118
    flybywire
    Nov 16, 2006
  8. optimist2
    Replies:
    1
    Views:
    1,139
    optimist2
    Aug 4, 2011
Loading...