Capital gains tax

[Coffeelover98]

I have never really thought about Capital gains tax. However my grandma has recently passed away and it has been decided that we sell her property. She and my late grandad bought it over 60 years ago. The more I try to understand about CGT the more unfair it seems why should we be taxed on something my grandparents worked hard for and wanted to pass on.

Tbh, you are being taxed on it, not them. You haven't earned that money, and are being taxed on it like any other windfall. Inheritance (or lack of) is a great perpetuator of inequality.

Get up in arms about general taxation or VAT or whatever else as you actually have worked (presumably) for that money, capital gains is far less of an issue in my mind.

And pay tax on the income? 😉

Funny, but doing that doesn't avoid both taxes in any way.

I disagree, she does seem to understand it correctly now. What has she said in this latest comment that is incorrect?

Only 4% of estates pay IHT.

I think you need to do some research (even 60 seconds of Google) before you try to do make political statements.

It's calculated from the valuation at time of death, not when they bought it, and what you then sell it for.
Probate will have put a value on it (say £100k). You eventually sell it for £120k. Take off the lawyers/agent fees, say you have a £15k profit. That's what you pay capital gains tax on, minus your personal allowance (which halved this year from £6k to £3k for 24/25).

If we get rid of CGT on things like increase in value in property that isn’t main residence, buying and selling shares, selling art/whisky etc on the basis that people paid tax on the money used in the purchase then the actual money people do “work hard” for ie wages will have to be taxed more. What about the capital gain on a second property that was bought using a capital gain on the previous second property? Who is paying tax there without cgt?

THEY may have worked hard to attain it.. YOU didn't.

It is, in fact, £1m.

https://www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-property-changes-aSr774L6FUfp

Chin up, op. If she died recently and you’re selling straightaway there probably isn’t any gain, and given that you can deduct the costs of disposal (sol and EA fees) you’ve probably made a capital loss.

In strict financial terms I regard it as a great privilege to pay IHT. Inheritance is the very definition of an unearned windfall.

And we have paid swingeing amounts

Our estate will be subject to CGT under current regs but I will be dead and DS gets the fruits of our labours.

The point with the capital gain is no one ever earned that money. It’s like stocks or any tax free interest on savings in ISA products. I can concede we never actually earned that money in the true sense. We do research so that takes a time and keep an eye on markets but that’s it.

Those rules have been in force many years, it's not a change that Labour have made!!

Well yes, if you’re a 20% tax payer it’s not the worst. Long term the house will go up in value and you can take equity out. Speak to a financial advisor I’m sure there are things you can do 👍🏼

Agreed. If all the taxes to be irate about it seems an odd one to choose.

To quote Chandler, 'my wallet's too small for my fifties and my diamond shoes are too tight...'.

You have a tax free windfall and will pay Capital Gains Tax only if your property windfall increases in value quite significantly - your Capital Gains Tax allowance and ability to offset sales fees etc will reduce any liability.

Governments budget to provide public services including hospitals, education and defence. Whatever the total cost, they need to raise a set amount of tax. If Inheritance Tax, or Capital Gains Tax is reduced or eliminated, they need to raise this sum elsewhere. Trying to target the super rich is notoriously unproductive. Easier targets are Income Tax, National Insurance and VAT. Increasing any or all of these risks disproportionately affecting those least able to pay, and in a country where many of the working people you refer to are reliant upon food banks to feed their children, does this seem fair? Or do you believe we should reduce spending on public services (which will hit hardest those unable to make private provision)?

Most of us like to think all our children are born with equal opportunities, but inherited wealth means irrespective of ability, hard work or character, children of wealthier parents routinely have significant material advantages. These advantages can follow them through life and maintain barriers to social mobility. Reducing or removing IHT and/or CGT would increase this inequality of opportunity further.

To declare my hand, I am in the extremely fortunate position of having assets which have increased in value over the past twenty years, but I cannot claim to have worked hard to earn this profit. I was lucky to buy when I did, and inflation has done the work. When I sell them, there will be a significant tax liability. My children will benefit from the remainder, and I truly hope they won't resent paying their share. There wouldn't be a violin small enough...

My mistake - either way, I don’t feel this ‘tax’ is unreasonable.

The main thing that's unreasonable about CGT is that you end up paying the same CGT on the same gain whether you've owned the asset for one year or for fifty years. There's no longer any provision made for inflation nor number of years owned, etc. Now THAT really is unreasonable. In the past, there've been periods of time when the gain for certain assets took into account the number of years you'd owned it and other periods of time when inflation over the period of ownership was taken into account. Now no provision is made at all. This is obviously detrimental for people who've owned an asset for long periods of time and is beneficial for people who've enjoyed a windfall owning an asset for a short period of time. Just one of the many unfair elements of our tax system.

There's so many ways to make it fairer, yet we've just had a "politics of envy" budget that has failed spectacularly to address any of the real issues. That comes after years of having a ridiculous "Office of tax simplification" that achieved the square root of bugger all and has quietly been scrapped!

You'd have done well to find out the facts before having a moan about it. If you sell the house then there is very likely to be no CGT payable. The gain is from you are in ownership not the lifetime of the property

So it hasn't been taxed?
GPs didn't pay any tax on the increase in value, you haven't paid tax, No-one is asking you to pay tax on what you inherited, only on the increase in value between inheriting it and selling it.