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This is an inheritance tax question; do you pay inheritance

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This is an inheritance tax question; do you pay inheritance tax on the value of the property at time the of death (as valued for probate - I have the certified accounts) or if the property remains unsold, do you pay to the value at sale? My mother died in 2002 - she did not pass her 50% share of the property to my step father but left it in trust for her children while he has the right to remain in the property until he dies and the property has increased in value since probate was granted.
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.
Both may be the answer in this instance - the value is considered at the time of probate - and included into the estate to be considered along with all other assets for Inheritance tax.
Then if the property is not sold at this time - then any gain made on the property between date of death and the date of sale then also has to be considered.
In thi instance your step father had 50% of the value to the date of his death - and your mothers 50% was protected after he death in 2002 by her placing her half share in a trust.
So assuming all the terms of the trust have been met - there may not be any capital gains due on the 50% place din trust, but a consideration of the step fathers 50% share - looking at the value of the gain made.
Then that gain can have the costs to sell deducted and the costs of any capital improvements made on the property since the step father died, and this gain is then divided up among all the beneficiaries, and if each of their share is less than £11,100 then there will be NO liability to capital gains (unless they have other gains for the tax year and have utilised their annual exemption allowance of £11,100)
Let me know if you require any further assistance.
Thanks
Sam
Customer: replied 1 year ago.

Thanks Sam. So just so I'm clear; say the property was valued at £200k at the time of her death and therefore my share was £100k. Now we are selling it for £250k so my share is £125k. I would be liable for inheritance tax on £100k and possibly capital gains tax on £25k? (Please ignore inheritance tax thresholds as there was significant capital at the time of her death and that threshold was used up)

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
In essence yes (If for Inheritance tax purposes the total estate was valued at more than £325,000 - which means all that she gave to everyone other than your step father, her spouse)which you indicate was the case,
So yes to the Inheritance tax
Then for capital gains you have a £25K gain (half of your share) - of which the first £11,100 is exempt leaving £13900 liable to capital gains
Thanks
Sam
Sam, Accountant
Category: Tax
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