Capital Gains Tax is the tax levied on profit from the sale of property or an investment.
There are two specific types by which you can own property and may make a gain on its disposal or even before it is actually sold.
When Someone Dies:
When someone dies, the assets they own pass to the person looking after the estate. This person is known as the ‘executor’ or ‘personal representative’. There’s no Capital Gains Tax to pay at that time, even though the assets have changed hands.
The executors or personal representatives are responsible for dealing with any Capital Gains Tax due to the date of death. Capital Gains Tax may be due on assets that the person sold or disposed of before they died.
After they’ve dealt with all the tax and financial matters of the estate, the personal representatives pass the remaining assets to the ‘beneficiaries’. Beneficiaries are people who inherit assets. There’s no Capital Gains Tax even though the assets have changed hands.
The personal representatives may sell or dispose of the assets and pass on the money (or ‘proceeds’) instead. They’ll need to work out the gain or loss on the disposal of the assets.
More details can be found out on HMRC website by following the link CGT BY HMRC
When you sell or dispose of an inherited asset, you may be liable to Capital Gains Tax on any profit or gain you make.
You’ll need to get a valuation of the asset at the date of death. Use this value as the cost of your asset to work out your gain or loss. If the value has been agreed for Inheritance Tax purposes you should use the same valuation.
When partners Separate or Divorce:
On separation between partners, assets are transferred between partners.
There are three different scenarios here which need to be considered. Asset transfer took place;
- in the tax year of separation
- in the tax year after you separated
- after you’ve divorced or your civil partnership has dissolved
See Details Below;
Transfers in the tax year of separation
If the transfer of the asset is made in the tax year of separation the rules of gifts will apply, You won’t have to pay Capital Gains Tax if both of the following apply:
· you’ve lived together for at least part of that tax year
· it isn’t ‘trading stock’ (trading goods bought for resale)
Transfers in the tax year after you’ve separated
Special rules apply if you transfer an asset to your husband, wife or civil partner in the tax year after you’ve separated. You’ll have to work out the capital gain or loss if all of the following apply:
- you transfer any asset other than your main residence
- you’ve been permanently separated for the whole of the tax return year
- you’re not divorced or your civil partnership hasn’t been dissolved
You’ll need to get a valuation of the asset on the date of the transfer. You use this value as the proceeds (the amount received) for your asset to work out your gain or loss.
If you transfer your main residence to your spouse or civil partner, the gain is covered by Private Residence Relief. There’s no Capital Gains Tax to pay as long as it has been your only or main residence throughout the time that you owned it.
Transfers after you’ve divorced or your civil partnership has dissolved
The rules for the transfer of assets after a divorce or the ‘dissolution’ (the formal end) of a civil partnership are complex. You’ll need to seek further advice to make sure you get your Capital Gains Tax right.
You need the following details before you contact us or HMRC:
- the date of the ‘decree absolute’ or dissolution
- the date of the court order, if an asset was transferred under a court order
- the date of any other contract showing when assets have been transferred
If you transfer your main residence to your spouse or civil partner, the gain is covered by Private Residence Relief. There’s no Capital Gains Tax to pay as long as it’s been your only or main residence throughout the time that you owned it. The final 3 years always qualify for relief even if you weren’t living there, as long as it has been your main home at some point during the time that you owned it.
In his autumn 2013 statement, the Chancellor announced that from 2014-15 this final period relief will only apply to the final 18 months of ownership. There will be an exception for people who are disabled or in long-term care. This measure is set to become law later in 2014.
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