When dealing with the administration of an estate the personal representatives (PRs) need to identify and value assets, settle liabilities and distribute the deceased’s estate to the beneficiaries.
It is the responsibility of PRs to consider any tax implications arising within the estate.
During the administration period of an estate the PRs are liable to Capital Gains Tax (CGT) on any chargeable gains made. An estate tax return may need to be completed and any CGT due would be paid from the estate.
PRs have a CGT allowance that that is separate from their personal CGT allowance, which means that they can dispose of estate assets with a gain of up to the CGT threshold during the tax year of the date of death and the following two tax years and not pay any CGT.
From April 2023, the CGT allowance has been reduced from £12,300 to £6000 for individuals and personal representatives for the 2023/24 tax year. The allowance will be further reduced to £3000 from April 2024.
This will have a significant impact on estates where properties, investments, shareholdings or other assets sell for higher than the ‘date of death’ values used when preparing the application for the Grant of Representation. Further, where the disposable asset is a residential property, the PRs must report and pay the tax within 60 days.
By reducing the annual CGT allowance, the Government estimates that for the year 2023 to 2024 around 500,000 individuals and trusts each year could be affected, increasing on a cumulative basis to 570,000 in 2024 to 2025. Of this group, by 2024 to 2025, it is estimated that 260,000 individuals and trusts will be brought into the scope of CGT for the first time.
Individuals and PRs subject to CGT, many for the first time, need to be aware of how the changes affect them and consider seeking advice.
The Private Client team at Bennett Oakley can help you, from drafting wills through to dealing with an estate after death. We can help and advise on many of the aspects of preplanning and dealing with the Grant of Probate and the returns to HMRC. Please contact us for further information.
