Inheritance Tax or Capital Gains Tax (UK)?

Edwards Finance > Capital Gains

Q. My father, our last surviving parent, died about a year ago. The value of his estate was less than the threshold for inheritance tax. My brother and I are sole beneficiaries and I am the sole executor. We decided between us to spend some of the liquidated assets to improve the property, mainly to increase its desirability so that it wold be sold quickly. We have now sold the property and partly because of market increases and partly because of the improvements the value has increased by £40,000. We invested less than £10,000 and did a lot of the work ourselves. At this new value we have exceeded the inheritance tax threshold for 2005, £275,000 by about £36,000. Is the estate now liable for inheritance tax or are we as individuals each liable for capital gains tax? I believe CGT. We inherited the property at the value on the day of my father's death and so any improvements we made are outside of the administration of the estate. My brother thinks I should declare inheritance tax and try and claim the property development costs as an executor's expense. Looking at the forms for inheritance tax I can't see quite how I can do this. Who is right?

A. You are. IHT is based on the value of the estate at the time of death - i.e. *before* you improved the house. Have you got an independent valuation of the value at the time of death? Provided you haven't used your CGT allowances elsewhere, there should be little CGT to pay. The gain is around 30k - i.e. 15k each, and you each have an allowance of something approaching 9k (I forget the exact figure). You *may* even be able to spread the gain across 2 tax years in which case there'll be *nothing* to pay. [Not sure about this last point - others will advise].

Ask Edwards a Finance Question

Other Questions:

How to minimize Capital Gains tax on Short Term and Long Term losses on stocks for this year and next

this year was pretty bad for me and im trying to reduce the pain by taking advantage of offsetting my (potential) gains with my losses- both short term and long term. I have realised $6,000 Short Term Losses (STL) and $9,000 Long Term Losse...

1) Can long term capital gain offset short term capital loss or vis vers? 2) How long is long term capital gain (12 or 18 mos)?> 1) Can long term capital gain offset short > term capital loss or vis vers? Capital losses off-set...

I live in California and I'm using TurboTax 2004. I sold a bunch of stock this past year and paid a big chunk of estimated taxes to the IRS to pay off the capital gains tax associated with the transaction. Now I've entered everything into Turbo...

My father, our last surviving parent, died about a year ago. The value of his estate was less than the threshold for inheritance tax. My brother and I are sole beneficiaries and I am the sole executor. We decided between us to spend some of the...

If I sell my home in the UK, and that sale goes through when I have become a tax resident in the USA, do I need to pay capital gains tax in either country?Probably both. You should be able to use the foreign tax credit in the US to offset (par...

Edwards Finance Menu

Ask a Question
About Us / Me
Contact Me
Privacy Policy

Sitemap

My Favorite Sites

PFBlog
Google Finance
Yahoo Finance
Motley Fool
Nveille's Financial Blog
AllFinanceMatters
Free Money Finance
2MillionBlog
The Terror Finance blog

Q&A Subjects