Capital Gains Tax and Inheritance Tax

Capital Gains Tax

You might have to pay Capital Gains Tax if you sell, give away or exchange an asset.

This will be calculated on the increase in value from your purchase (or when you inherited).

The legal term for the many ways you can cease to own an asset is 'dispose of' assets. (In some cases you may be treated as if you've disposed of an asset that you still own - for example, if you receive compensation for a damaged antique.)

If the asset you inherited increases in value between the date of the deceased's death and the date you dispose of it, the increase is a 'capital gain'. See more on this in the section below, and in the guides on Capital Gains Tax.

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6 April 2017 onwards
The following Capital Gains Tax rates apply:

• 10% and 20% tax rates for individuals (not including residential property and carried interest)
• 18% and 28% tax rates for individuals for residential property and carried interest
• 20% for trustees or for personal representatives of someone who has died (not including residential property)
• 28% for trustees or for personal representatives of someone who has died for disposals of residential property
• 10% for gains qualifying for Entrepreneurs’ Relief
• 28% for Capital Gains Tax on property where the Annual Tax on Enveloped Dwellings is paid, AEA is not applicable
• 20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property)

updated February 2022

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From 6 April 2015, non-UK residents became liable to pay CGT on gains from UK residential property.

Before this, non-residents were generally exempt from CGT on UK property sales.

The Finance Act 2015 introduced this to level the playing field between UK and overseas investors.

For CGT calculations, 5 April 2015 is used as the "rebasing date".

This means non-residents could use the market value of the property as of 5 April 2015 as their acquisition cost, rather than the original purchase price.

This rebasing helps isolate gains made after the rule change.

Inheritance Tax

is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

• the value of your estate is below the £325,000 threshold
• you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

If the estate’s value is below the threshold you’ll still need to report it to HMRC.

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000.

If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £1 million.

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The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

updated February 2022

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We will also offer advice on the likely reliefs available from Capital Gains Tax and Inheritance Tax such as the following:

• IT - Agricultural Property Relief (can be up to 100%), can also apply to Life time gifts.
• IT - Business Relief (50% or 100%)
• CGT - Business Asset Disposal Relief (reduces the rate charged from 20% to 10%)

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If you are the beneficiary of a will you usually won't have to pay Inheritance Tax on money, assets or property you inherit. The Inheritance Tax generally comes out of the deceased's estate before the inheritance is passed on. You will usually only owe Inheritance Tax on a legacy if either of the following applies:
• it says in the will that you should pay Inheritance Tax
• the deceased's estate can't pay it

If you subsequently sell the asset you will be liable for Capital Gains Tax on any increase in value from the probate valuation, subject to allowances and if the property has not become your main residence. 

Please contact us for initial advice. Further advice is available from HM Revenue and Customs here.