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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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A relative passed away a year ago and I am the executor of

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A relative passed away a year ago and I am the executor of her will. Her property was left to 3 of us, 50% share to me and 25% each to the others. If I decide to buy out the other beneficiaries their share of the property at its current valuation, what is my / our capital gains tax liability? Probate was completed in May. I own another property. Thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

The CGT cost of the property for each of you and the two other beneficiaries is the probate value of the property in proportion to your respective shares. If you buy out the other two, they will have CGT to pay on the excess over £11,000 (the annual CGT exemption) of their respective gains assuming they have no other gains in the same tax year.

So, for example, if the property had a probate value of £200,000, your share has a CGT cost of £100,000 and each of the two others have a CGT cost of £50,000. If the property is now worth £300,000 and you buy out the other two for £75,000 each, they will each make a gain of £25,000 (£75,000 - £50,000). The first £11,000 of their respective gains will be tax free and the balance of £14,000 each will be taxed at 18% or 28% or a combination of the two rates depending on the level of their respective incomes in the tax year they sell their shares of the property. You will then own the property with a CGT cost of £250,000 (£100,000 + £75,000 + £75,000).

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
So the beneficiaries have to pay CGT on the increase in the value of the property from probate? Based on the property values you mentioned, what GCT would I have to pay if I sold the flat next year for £350k?
Expert:  TonyTax replied 2 years ago.
The gain is calculated using the probate value as the cost for CGT purposes.

If you sold the flat for £350,000 and had a base cost of £250,000 (per my example), you would make a gain of £100,000. The first £11,000 will be tax free leaving you with a taxable gain of £89,000. If the property was sold in 2015/16, one of the following scenarios would apply to you:

1 If your income in 2015/16 including taxable gains is £42,285 or less, then all your taxable gains will be taxed at 18%.

2 If your income in 2015/16 excluding taxable gains is more than £42,285, then all your taxable gains will be taxed at 28%.

3 If your income in 2015/16 excluding taxable gains is less than £42,285 but more than £42,285 when you add the taxable gains, then some of your gains will be taxed at 18% and some at 28%.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15759
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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