When you are dealing with the estate of a loved one, it can be difficult to know where you stand on Capital Gains Tax, or CGT, during Probate. When it comes to shares, it can be even more confusing. But never fear, we’ve put together this guide to help you work out if you’ll be charged Capital Gains Tax on shares during Probate.
To begin with, it is worth noting that though the value of the shares must be included within the estate for Probate, CGT isn’t something that will be necessarily due whilst the estate is in Probate. Whether Capital Gains Tax is due or not on shares in Probate, comes down to two thing. First whether they are sold during Probate. Secondly, whether their value has risen since the date of death.
Capital Gains Tax Overview
Capital Gains Tax is a tax on profit. If someone sells an asset and makes a profit, CGT is due. This can apply to things such as shares, artwork, collectables, antiques, or even business assets. It can also apply to the sale of some property.
If CGT is due, the rate of tax is normally 20%. The only except to this is property which is a 28% rate. Like income tax, Capital Gains Tax has a tax-free allowance. In 2018/2019, the tax-free allowance was £11,700, rising to £12,000 for 2019/2020, and then £12,300 for 2020/2021. The tax-free allowance applies to the estate of the deceased for the tax year prior to their death and the two years after.
Where are the Shares Held?
Whether CGT is due can depend on where the shares are held. Shares and investments such as ISA or PEPS shares are untaxable. Therefore, not liable for Capital Gains Tax. However, other shares can be liable for Capital Gains and other taxes when sold.
Shares Sold During Probate
If shares are sold during Probate, then it is the responsibility of the executor or administrator of the estate to discover whether Capital Gains Tax is due. If the shares rise in value between the date of death and a sale during Probate, then any profit that has arisen between the date of death and date of sale in Probate could be liable for CGT.
Selling shares during Probate is very complex and it needs to be done properly. If you are trying to sell shares during Probate, then contact us now for advice on how to do it correctly.
Shares Transferred to Beneficiaries
When shares are transferred directly to the beneficiaries, then CGT is not due on the shares. If the beneficiaries sell the shares later, then they may have to pay CGT on profit from the sale. This gain will be based upon the value of the shares from the date of death. Just as they would if the shares were sold during Probate.
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