Beating the Capital Gains Tax rap

In life, CGT occurs when an asset is sold for more than was paid for it. But something rather nifty happens in death: The executor or administrator is treated as having acquired the deceased's asset at its market value (the value of the asset at the date of death, not the date of purchase). As a result, assets that naturally increase in value over time and have a CGT liability hanging over them – sword of Damocles style – are usually free of CGT!

However, if the asset increases further in value during the probate process (remember, the whole operation can take over a year), then CGT may be chargeable. But the executor or administrator is granted a CGT allowance of £9,200 in a tax year – if the CGT gain is less than £9,200, hey presto, no CGT is due.

Beating the Capital Gains Tax rap

If the deceased's assets increase more than £9,200 since the death and before leaving the estate, capital gains are now taxed at a flat rate of 18 per cent.

The deceased's main residence is usually free of CGT, but a second home isn't.

If the asset falls in value during the probate process, then you can offset this loss against a capital gain made on the sale of another asset.

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