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Where Taxpayers and Advisers Meet

CGT on inherited house sale

david66
Posts:16
Joined:Fri Jan 22, 2021 7:03 pm
CGT on inherited house sale

Postby david66 » Tue May 17, 2022 7:45 pm

My wife is one of three beneficiaries in a will (none are direct descendants, only nephews and nieces). They are about to sell the residence of the deceased for about 350k. The house was valued on the IHT forms at 265k so there is an 85k chargeable gain. Is the following correct in terms of CGT options:

If the house is sold by the estate, there is a one off CGT allowance of 12,300 and the remaining tax payable by the beneficiaries (85,000 - 12,300) @ 28% = 20,356 split three ways = 6785.33 each

If the house ownership is transferred to the three beneficiaries prior to sale so they are all the vendors, there is CGT on 85,000 @ 18% (all beneficiaries are in the lower tax bracket) = 15,300 , which when split between three = 5100 which comes well within the personal annual allowance (assuming no other charges) and so there is no tax to pay.

Is this analysis correct (it seems too good to be true!)?

Many thanks for any advice.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT on inherited house sale

Postby pawncob » Tue May 17, 2022 7:57 pm

Was the estate taxable?
With a pinch of salt take what I say, but don't exceed your RDA

david66
Posts:16
Joined:Fri Jan 22, 2021 7:03 pm

Re: CGT on inherited house sale

Postby david66 » Tue May 17, 2022 8:18 pm

The estate was up to the max interms of IHT allowance and the house was part of the estate, so I would assume it was taxable?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT on inherited house sale

Postby maths » Tue May 17, 2022 8:24 pm

Using the figures provided if the estate (ie PRs) sell then CGT amounts to 20,356 (or 6,785 each).

If the house is assented to three beneficiaries then each beneficiary's CGT charge is 2,886 (each beneficiary gets the CGT free allowance of 12,300).

david66
Posts:16
Joined:Fri Jan 22, 2021 7:03 pm

Re: CGT on inherited house sale

Postby david66 » Tue May 17, 2022 8:44 pm

Hi "maths",

Thanks for your reply. Could you elaborate on the derivation of the 2886 figure?

Also are you saying that 2886 is less than the individual allowance so nothing to pay?

Thanks

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT on inherited house sale

Postby maths » Wed May 18, 2022 4:11 pm

£12,300 is the annual exempt amount for individuals when calculating their CGT lability.

If PRs appoint the three beneficiaries a 1/3rd interest in the property then on sale each beneficiary's CGT charge will be:

[[1/3 x 350k - 1/3 x 265k] - 12,300] x 0.18 = 2,886.

david66
Posts:16
Joined:Fri Jan 22, 2021 7:03 pm

Re: CGT on inherited house sale

Postby david66 » Wed May 18, 2022 11:05 pm

Got it!

Many thanks.


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