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Where Taxpayers and Advisers Meet

IHT Forms and CGT On probate property

Ponomis
Posts:3
Joined:Fri Apr 29, 2022 2:44 pm
IHT Forms and CGT On probate property

Postby Ponomis » Fri Apr 29, 2022 2:59 pm

Hi,

I was wandering if someone could confirm my understanding of the requirements on my grandmother's estate.

- My grandmother died recently and has left everything to be split equally between myself, sister and Dad. My dad and I are the executors.
- My grandfather died in 2000 and left everything to my grandmother.
- Estate value approx 800K with anticipated house sale of 650k.
- House value approx 550k for probate.

My understanding is that no IHT is due as we can use my grandfathers RNRB (175k) and his IHT allowance (325k) to offset IHT as he left everything to my grandmother. I have his will and probate forms. This 500K plus my grandmothers IHT allowance + RNRB takes the threshold to 1M, thus the estate is under by approx 200k.

I also understand that as of 01 Jan 2022 I no longer have to inform or complete any IHT forms. Is this correct?

Regarding CGT. I understand that as the house was valued at 550k for probate purposes and a sale looks likely at 650k, then CGT will be due on the 100k increase minus any costs. Is this correct? If I am correct, is it best to pay CGT once from the estate or have us all individually handle our own CGT?

Thanks for any help given.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT Forms and CGT On probate property

Postby AGoodman » Tue May 03, 2022 10:48 am

If your grandmother died before 1 Jan 2022 then the new excepted estate rules don't apply i'm afraid. I assume it was before as, if she died recently, you should be able to submit the sale price as the probate price and save any CGT.

If she died before 1/1/22 you'll need to submit the full IHT400 and schedules in order to claim the transferrable nil rate bands.

The estate can sell the property and pay the CGT but you are likely to be better off appropriating shares of it to the heirs and them paying the tax because -

(a) you can claim 3 or 4 personal exemptions to set against the tax; and
(b) the trustees pay 28% tax whereas any of you who pay basic rate or no tax may get away with just 18% CGT on all or part of your share.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT Forms and CGT On probate property

Postby AGoodman » Tue May 03, 2022 1:53 pm

If she died after 1/1/22 I think you still need to complete the full forms as the estate utilises the residential nil rate band (regular and transferred)

Ponomis
Posts:3
Joined:Fri Apr 29, 2022 2:44 pm

Re: IHT Forms and CGT On probate property

Postby Ponomis » Fri May 06, 2022 10:59 am

Cheers for the response. She only died for a few weeks ago and looking to sell house asap as we don't want it being left empty. Sale price will be agreed next week as we have multiple offers already. Market in Sutton Coldfield is a bit crazy right now. I came to the conclusion that I wouldn't need to fill in IHT400 due to this page
https://www.gov.uk/guidance/transferring-unused-basic-threshold-for-inheritance-tax which seems to apply you can apply to transfer unused amount when you apply for probate. Relevant bit in red.

Where full details are not needed — excepted estates
If it’s an excepted estate check which process you need to follow.

For deaths on or before 31 December 2021 you can only make a claim to transfer the full unused threshold with form IHT217.

If you’re transferring less than the full unused threshold, you’ll no longer qualify as an excepted estate. You must make a full return of estate with form IHT400 and form IHT402.

For deaths on or after 1 January 2022 you:

can transfer any unused amount
should claim when you apply for probate

Ponomis
Posts:3
Joined:Fri Apr 29, 2022 2:44 pm

Re: IHT Forms and CGT On probate property

Postby Ponomis » Fri May 06, 2022 11:05 am

If she died after 1/1/22 I think you still need to complete the full forms as the estate utilises the residential nil rate band (regular and transferred)
Looking in to it a bit more. You may be right. The guidance seems to suggest that it's an "expected estate" and no IHT400 required if it's up to £650k. It doesn't mention the residence nil-rate band on top of it.

I think I will just do an IHT400 anyway. Surely there can't be any harm in completing it anyway.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT Forms and CGT On probate property

Postby AGoodman » Fri May 06, 2022 12:20 pm

Yeah, for reasons known only to themselves, HMRC have imposed different treatment on the "regular" nil rate band and residential nil rate band. I have no idea why.

The non-exempt estate has to be £650k or less to qualify as excepted.

zbaronj35
Posts:3
Joined:Fri Oct 07, 2022 3:33 pm

Re: IHT Forms and CGT On probate property

Postby zbaronj35 » Fri Oct 07, 2022 5:25 pm

I have a very similar query to yours so wondered if you went straight to Probate without informing HMRC..
My dad's estate would be covered just by utilizing my pre-deceased mothers IHT allowance (the estate is less than £650k), but speaking to HMRC they insist I need to send the IHT400 and IHT402.. I just don't understand this reasoning as I've done all the calculations and I should have an "Excepted Estate" where no tax is due.

Death occurred after Jan 2022


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