The answer likely is ‘no’, but we’re guessing you want a little more than that. We’re also thinking you probably don’t want references to tedious Tax Acts, and Section Numbers that you won’t be arsed to look up anyway..
So, this blog is designed to be factual, but from 40,000 feet, rather than down in the weeds with the taxman
We’re going less Shakespeare, more Strickland Gillilan . Strickland wrote the world’s shortest poem, called ‘Lines on the Antiquity of Microbes’ (it’s about Fleas)
It goes: ‘Adam, had ‘em’!
For the avoidance of doubt (and haters), the taxman referred to in the previous paragraph, was not named Adam..
What is Capital Gains Tax (CGT)?
Simplistically, CGT is payable on the difference between what you paid for an asset, and what you sold it for, assuming you made a profit, and after some allowances. Capital assets like property, and investments, are subject to CGT
Capital Gains Tax rates
Sticking with the theme of ‘basic’, here’s the essence of the 5 rates of CGT payable by individuals:
| Rate | Basis |
| 10% | Where Business Asset Disposal Relief or Investor’s Relief is available |
| 18% | Gains on Residential Property by Basic Rate Taxpayers |
| 28% | Gains on Residential Property by Higher Rate Taxpayers |
| 10% | Other Gains made by Basic Rate Taxpayers |
| 20% | Other Gains made by Higher Rate Taxpayers |
Company Shares and Residential Property
Company shares are NOT classed as Residential Property even when the Company is investing in Residential Property
Uplift in Value at Death
When you die, the CGT base-costs of your assets are ‘uplifted’ and passed to your beneficiaries, at their Market Value at the date of your death, known as their Probate Value
So, if your assets are transferred directly to your beneficiaries, no CGT is payable
That’s only part of the issue
For CGT purposes, death might be a ‘good thing’ but Inheritance Tax is payable at 40%, which means HMRC will confiscate 40% of everything when you die, unless you have planned properly, and in well in advance
Don’t try to cut corners. All tax planning, but Inheritance Tax planning in particular, must be done with attention to detail, and with full knowledge of the entire picture of the individual’s situation
What about the Family Home?
If the deceased’s Family Home is transferred directly to a beneficiary then there’s no CGT to pay. If the Beneficiary moves into the former Family Home then, assuming it qualifies as their Principal Private Residence, there may be no CGT to pay when it is subsequently sold
If, say, Siblings decide to sell the former Family Home, and it has increased in value in excess of the Probate Value, then it’s likely there will be CGT to pay (after some minor Allowances)
When is CGT payable?
If you are a UK resident, then when you sell or dispose of the whole or part of a Property in the UK, and where CGT is due, then you must tell HMRC within 60 days of completion
What is Inheritance Tax?
Inheritance Tax is triggered not by death, but by transfer of value. That’s most often upon death, but Inheritance Tax is chargeable on any transfer of value, made by any person, at any time!
Inheritance Tax is payable on death as everyone is forced to transfer their entire wealth but Inheritance Tax also arises on certain Lifetime Gifts and Other Transfers
Most lifetime transfers to other individuals are exempt, or only become chargeable in the event of death within 7 years of making the gift
What is a Transfer of Value?
Whenever you dispose of something, and your total net worth is reduced, then a Transfer of Value occurs
Importantly, it is the reduction in your Net Wealth that generates the Transfer of Value, and that may not be the value of the asset disposed of
Mercifully, the disposal of assets at arm’s length, between unconnected parties, is not treated as a Transfer of Value, so there’s no problem in doing your weekly shop, etc!
Who is liable for Inheritance Tax?
In simple terms, a person is domiciled in the country in which they have their permanent home
For UK domiciled individuals, Inheritance Tax arises on the net value of their entire estate at the time of their death, wherever they were when they died, less the Nil Rate Band of £325,000 currently. There are a small number of additional Exemptions and Reliefs that may apply, in specific circumstances
On death, Inheritance Tax at 40%, is levied on the entire value of your Estate, less exemptions
Which means that HMRC will confiscate 40% of everything, unless you plan properly, and well in advance – which you are legally entitled to do!
What is our Estate?
Well, it’s absolutely everything you own, all added together. It includes land and property, shares, securities, cash, savings, antiques, paintings, car(s), furniture and anything and everything else that has any monetary value, and it’s all subject to Inheritance Tax at 40%
Your Individual Savings Account (ISA) is included in your estate for Inheritance Tax purposes. Which means that the ‘tax-efficient’ ISA, which your financial middlemen sold you, will really only be worth 60% of the valuation you were given at the last ‘review’ meeting..
Your Pension funds, and Life Insurance proceeds, (if properly written in Trust – go check, now!) should be outside of your Estate for Inheritance Tax purposes
What deductions can be made?
Basically, you can deduct liabilities at the date of death including bank loans, credit card bills, overdraft, mortgage, utility bills, etc
You can deduct outstanding Tax bills, like Income Tax, and Capital Gains Tax
Oh, and ‘reasonable’ Funeral Costs are allowed
Bizarrely, the costs of Obtaining Probate, and Administering your Estate, cannot be deducted
How to get your Inheritance Tax planning sorted and keep it up to date
The UK has one of the most complex tax structures in the world, with around 18,000 pages of tax laws, and nearly 1,000 tax reliefs and allowances. You can’t know them all. That’s a job for our team of Chartered Tax Advisors (CTA’s)
At outset, we ask you to visualise the future you want for your family legacy then, with our help, work back to today, using informed choices. Our CTA’s provide you with your legacy planning strategy, and all the tools you need to realise your vision
Once your Inheritance Tax planning is finalised, and paid for, you may be invited to become a full member of our Resource Optimisation Program (ROP) where our CTA’s will continue to work with you to aim to maintain everything for you while you’re alive, and they’ll even handle probate for your beneficiaries when you die, if that’s what you want..
ROP provides you with 3 options: our CTA’s will implement, maintain and manage everything, or our CTA’s will work with your existing advisors, or you can do it all yourself. That’s ‘Done for you’, ‘Done with you’ or ‘Done by you’
Contact us HERE to talk to an expert, for FREE
Further Reading
