Probate/inheritance tax query - can anyone advise?

[pyjamas89]

Our lovely Mum died last August and we are in the process of selling her house. I've come across a query where googling is very confusing so hoping someone can help!

We have been granted probate - the estate was valued at £492k (ie just shy of the IHT threshold once allowance for leaving a property to a direct descendant is taken into account, so thought no IHT due).

We've been lucky with the offer we've accepted on the house and it's £15k above what it was valued at, therefore just taking us into IHT bracket of over £500k.

What do I need to do? Is there a way to recalculate the estate value and pay the IHT owed? Places online are talking about Captial Gains Tax and now I'm super confused over what will admittedly only be about £2-3k!

I feel like it shouldn't be as complicated as it feels but I suppose everything feels mere stressful when you're grieving. Any advice greatly appreciated.

I've noticed recently that probate properties are being marketed as fixed price. My BFF's being one. This ensures that the purchaser doesn't pay enough to put this into inheritance tax territory. It would probably be easier to get the purchaser to pay a fixed price so you don't have to get involved with the tax man.

Id tell them you can only accept X amount. Sorting the tax will cost you more in time and effort than it’s worth!

If you've been granted Probate then I guess you must have satisfied HMRC that the estate at date of death was below the IHT threshold. The property would have been assigned a probate value at that date. Probate values might be a tad lower than an offer from somebody who has fallen head over heels for the place.

So far as IHT is concerned that's it.

It's possible a gain since death/probate might trigger CGT; not sure how that works.

Or have I missed something?

If you had a formal valuation made at the time of your Mum’s death, you’ll need to report the gain on sale as a capital gain. You can deduct from the gross gain the costs of sale- legal fees and estate agency fees and part of the probate costs. Depending on other asset sales within the estate you may also have the capital gains tax annual exemption of £3,000 available. Better to pay capital gains tax than inheritance tax as the rate is much lower- for now. You’ll need to report net gain on sale of house within 60 days of sale completing.

This. Stick with the probate valuation, take the 507K, declare the 15k of CGT, subtract sale costs and £3K annual CGT allowance.
It'll be cheaper and easier than trying to backdate the probate.

Yes, you have. If a house sells for more than the probate valuation, IHT may need to be reassessed, or there may be CGT to pay. See www.mytaxaccountant.co.uk/post/house-sold-more-than-probate-value

in this situation there is a question whether CGT would apply or whether you need to do a corrective inheritance tax account. Ultimately it will be up to HMRC to decide but given the length of time between the date your Mum passed away and the sale, it’s likely CGT would be more appropriate, especially if you had a formal probate valuation done by a Chartered Surveyor. You have a short period after completion to submit your CGT return and pay the tax due. If HMRC disagree that it’s a capital gain, they’ll let you know and may get the district valuer involved.

Probate was granted on my father’s estate last year, with some IHT to pay. We paid the first instalment. We’d used a good probate solicitor to file it. All good. Then two months later hmrc got back in touch wanting to send a district valuer to reassess the house. The solicitor said it was rate, but HmRC could do that.

Completely agree with the post which states look at the CGT option rather than IHT as the rate is lower. Take the costs of sale off the price of the house and claim the annual exemption allowance and the net gain will be lower. The CGT has to be declared withing 60 days of completion of the sale. This is a much simpler way rather than re assess the IHT