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Are we liable individually for capitol gains tax on our portion of the house that has increased in value?

05 May 2022

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Question by Andrea

If probate has been granted on an estate valued under 230k the house which formed the majority of the value (180k) has increased to 280k since probate was granted, year and half ago, although we didn’t pay inheritance tax are we now liable individually for capitol gains tax on our portion that has increased in value (there are 3 beneficiaries)


Answered by Jamie Flook

Hi Andrea

The short answer is yes, as beneficiaries you are liable for Capital Gains Tax (CGT) in the proportion of ownership. In your case there is a £100,000 gain.

Assuming this is owned equally, each owner has gained £33,333.33.
Each person has a £12,300 CGT allowance called the Annual Exempt Amount (AEA) with no tax to pay on gains up to this level in a year.
Be mindful that any other gains realised in the tax year of the sale will use up this allowance.

Therefore, in this example (assuming none of the owners have any other gains for the year), each owner has exceeded the allowance by £21,033.33.

Property CGT is higher than normal CGT rates, at 18% for a non-tax payer or basic-rate tax payer and 28% for a higher-rate or top-rate tax payer.
Assuming all owners are basic-rate tax payers, there would be £3,785.99 tax to pay.

I must stress that this is an example based on assumptions, but hopefully it helps!

Another thing to be aware of is that you have to report and pay tax on any property gains within 60 days.
Here's some info to read through on this from gov.uk:

https://www.tax.service.gov.uk/capital-gains-tax-uk-property/start/report-pay-capital-gains-tax-uk-property

All the best

Jamie

Answered by

Jamie Flook

Financial Planner

I am a financial planner at Magenta Financial Planning and you can usually find me dividing my time between my home in a village called Claverham, just outside of Bristol, and Bridgend, where the Magenta office is based.