If someone owned shares at the time of their death, then the value of these shares will be included in their Estate. Whether or not Capital Gains Tax will be payable on these shares will depend on whether or not they are sold during Probate, and if they are, whether they have increased in value since the date of death.
For free initial advice and guidance call our Probate Advisors on 03306069584 or contact us online and we will help you.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax that is applied to the profit (or 'gain') that someone has made when they sell something of value. This includes shares, business assets and certain personal possessions that are worth over £6,000 (such as antiques, artwork or collectibles).
In some instances Capital Gains Tax might also apply to properties, but usually this isn't the case if the owner lived in the property before they died. See the Gov.uk website for more information on property sales and tax.
If an asset is liable for CGT then this will usually be charged at a rate of 20%, with the exception of property which is charged at 28%. Every person has an annual Capital Gains tax-fee allowance. For the tax year 2018/2019 this is £11,700. The allowance can be applied to the deceased's Estate for the tax year leading up to their death and the following two years afterwards.
For more information on how CGT works during Probate, see Do I Need to Pay Capital Gains Tax during Probate?
Whether CGT will need to be paid on shares during Probate will depend on a few factors, including how they are held, at what stage they are being sold and how much they have increased in value.
How Are the Shares Held?
Not all shares will be liable for CGT, so it's important to first establish whether the shares in question will be. Most shares and other investments will be liable for tax, excluding:
Shares that are held in an ISA or PEPShares held in an employer Share Incentive Plan (SIP)Some employee shareholder shares (depending on when these were acquired)
Most other shares could potentially be liable for Capital Gains Tax when sold.
Dealing with Shares after the Owner Has Died
When someone dies, their assets will pass to Beneficiaries either in line with the terms of their Will or, if there was no Will, in line with inheritance laws called the Rules of Intestacy.
If the deceased owned shares, then ownership of these shares might be transferred to the Beneficiaries, if this is what is set out in the Will. Alternatively, the shares may be sold and the proceeds added to the Estate funds, to then be distributed in that way.
If Shares Are Sold during Probate
If the shares are sold during Probate, then the Executor or Administrator of the Estate will need to establish whether any CGT needs to be paid on these.
The 'gain' on shares sold during probate will be any increase on the value of the shares compared with their value on the date of death. Any profit that the shares have made between the date of death and the date of sale could be liable for CGT.
Bear in mind that selling shares during Probate can be a complicated process, which will need to be carried out in the correct way.
If Shares Are Transferred to Beneficiaries
If shares are transferred directly to Beneficiaries, then no Capital Gains Tax will be payable on these shares. However, if the Beneficiary then decides to sell the shares at a later date, they may become liable for CGT at this point.
Again, the gain will be based on the value of the shares at the date of death. This figure can be deducted from the sale value of the shares to calculate the gain. This is the amount that may then be liable for CGT.
To speak with a Co-op Probate Advisor call 03306069584 or contact us online and we will call you.