thank you. A capital gains tax does not apply in relation to assets when summary passes away. This is because there is a relief in respect of capital gains tax in the circumstances to ensure that the situation does not arise where the state may be liable to both inheritance tax and capital gains tax.
Accordingly, the way in which these two taxes work together is that for the purposes of capital gains tax, the value of the asset or property in question is uplifted and rebased as at the probate value that you provide for the property on the estate return.
by way of example, if we pretend that the property was purchased some years ago for £100,000 and was worth £200,000 when the owner passed away and will be sold in five years time for £250,000, then capital gains tax would be worked out on the basis of the difference between £200,000 being the value as at the date the owner passed away and £250,000 being the value we are pretending the property is worth at the time of sale; not the difference between the acquisition value of £100,000 and the sale price of £250,000 as would usually be the case.
This is because as discussed above, the base value for capital gains tax is uplifted to the value as at the date the owner passed away.
There is therefore no capital gains tax to pay in relation to paying off the mortgage and any capital gains tax that may or may not be due in the future would be based on the difference in value as between the probate value and any eventual sale in the future.