Capital Gains Tax Payable by Executors

31 March 2017

When acting as an executor it’s important to be aware of potential capital gains tax issues when selling the deceased person’s assets, also known as ‘disposing of assets’. The following information applies in England and Wales.

An executor has an annual capital gains tax allowance which is currently £11,100. This means that as an executor, you can make disposals of assets in a tax year at a capital gain of up to £11,100 without incurring capital gains tax.

Any total gains over the £11,100 limit will be subject to capital gains tax (CGT). This annual allowance is available for the tax year of death and the following two tax years after that. After that time has expired there is no tax-free capital gains tax allowance available.

The current rate at which CGT is charged depends on what type of asset the gain relate to. For sales of residential property, the rate at which capital gains tax is charged is 28%. In relation to the disposal of any other assets, the rate at which capital gains tax is charged is 20%.

When calculating whether there is any capital gain on the disposal of an asset, an Executor should use the value of the asset as it was at the date of death. This is called the 'acquisition cost'. This represents a free uplift of the value to the date of death.

When establishing whether CGT is payable, an executor needs to take into account all sales in a tax year, including any sold at a loss. It’s the overall position during the tax year that should be considered.

When ascertaining whether any capital gains tax is payable, it’s important to note that an executor can deduct the costs of selling an asset from the capital gain. Such costs include estate agent fees, solicitor’s fees and stockbroker’s charges when selling shares. UK Government stocks are exempt from capital gains tax.

When disposing of assets, an executor should be mindful of whether a sale will result in capital gains tax being payable. If so, an executor should consider whether a sale on behalf of a beneficiary/beneficiaries in their capacity as bare trustee would mean that capital gains tax could be avoided.

For example, if a property or shares were being sold at a capital gain of over £11,100 it may be advantageous to appropriate the property, or shares of the property, to the beneficiaries prior to sale. This way each beneficiary would have their own annual CGT allowance available to offset against any gain.

For more information see How to Be an Executor of a Will.

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