CGT on assets Inc primary residence at death

[DotPotato]

Morning all, here to find out some views on something I think should / could change in the budget.

At the moment there is a HUGE tax loophole whereby no CGT is paid on assets that you pass on at death. For example, you buy shares in 1950 and transfer ownership in your will, there is zero CGT paid on the capital increase you’ve made over 70 years. Same applies to property, even second homes. If you transfer ownership of the asset when you die, the inheritor receives the asset at the 2024 price but no CGT is due on the gain since it was bought by the deceased person.

This is just mad, especially as many assets will not qualify for inheritance tax, and there’s an exemption for passing on property of up to £1 million.

I think this should be closed in the budget. CGT should be payable by the estate on ANY asset that is transferred after death, including primary residence. After that, inheritance tax rules should be applied to what remains, potentially at a lower rate given that we are now applying GCT.

I think this would be a very fair way of taxing wealth that is 100% UNTAXED, because you’re not asking someone to pay tax on unrealised gains when they’re alive using income they might not have, and you’re not passing on freebies worth potentially hundreds of thousands of pounds to people who inherit just because they were lucky enough to be born to rich parents.

Interested in people’s thoughts and how un/popular it might be?

So so you think a family farm that is passed down from generation to generation and is the sole valuable asset shpuld be whittled down by 20% every generation forcing each inheritor to sell off a fifth of the land until there is no farm left?

I think it would be a nightmare to implement, simply because you would have to prove date of purchase and purchase value. Executors often have no idea about that sort of information.

Better to reduce the IHT NRB, and remove the Residence NRB, which is also an administrative pain.

Tax has to be workable to be cost effective to administer.

There are reliefs on businesses and farms that mean this wouldn’t happen.

Ro rephrase your question though, do I think that 99.99% of the country should get freebies just to make sure a farmer can stay in business, no I don’t.

there is a country where they have this rule and it has escaped me which… but if you can’t prove the price that you bought it at, it’s assumed you bought it at zero.

And apparently it’s amazing how many people manage to come up with documentation!!!

So someone leaving a house worth £400k who last moved a year ago their estate would owe no CGT but someone with the same asset who had lived in the family home for 40 years their estate would have CGT to pay. How is that fair?

It should be covered by inheritance tax.

Again there are rules about this too - it’s deprivation of assets.

The answer is that the threshold for inheritance tax is too high and there are too many exemptions. Not to add a very tricky additional tax - if CGT is due on primary residences at death, why not just generally? What about indexation and the costs of repairs etc?

How is moving house deprivation of assets?

Your last point is completely wrong. If someone moves from a family home into a retirement flat because it suits their needs better that isn't deprivation of assets!

Deprivation of assets is only if the money is given away and that applies only to avoiding care costs. There is a 7 year rule for inheritance.

If CGT is to be applied to primary residences it should be applied on any sale with an indexation allowances and allowances for capital improvements. Not just where a primary residence is part of an estate.

CGT doesn’t include indexation for anything, why should property be any different?

And why should repairs be tax free? If you mean improvements, then again there are already clear rules on what constitutes deductible capital expenditure that are applied to second + homes. So that’s not a barrier either. I think the idea that you can inherit a second home without any CGT being paid is particularly unfair given that it would be due if it was sold when the owner was alive.

I’m finding it interesting that the only CGT people are worried about is on property. What about other assets, what do people think?

I assume that you have nothing to pass on to your kids or don’t have kids….Most parents want to be able to maximise what their children inherit. This just sounds like sour grapes.

We have the framework in place for it.

How do you account for the improvements, changes, investment made in your home. For the loan repayments, the interest paid on those loans. For much of the homes life, it will have belonged to the bank, not the owner.

I assume you don't own your own house, or have children. There is a basic inherent human need to work, invest, provide for your family, including when you die.

IHT is already taking a higher percentage of estates than at any time since it's inception. General tax is already higher than ever before. You want more?? What for??

I think it would be too complicated and a bit unfair to potentially tax twice. Stick to inheritance tax.

This is controversial, but I wouldn't be averse to the Private Residence Relief being abolished. Perhaps only for properties worth above a certain amount?

Completely wrong. We are mortgage free and have a lot of assets, including in pensions which I also think should be taxed when they are passed on (they’re not at the moment).

Most parents also want decent public services, NHS and education for their children and grandchildren. But everyone seems to want someone else to pay for it.

That’s why I thought it would be interesting to pose this question. If we can’t / won’t tax income anymore then we have to tax wealth. But taxing unrealised gains is problematic so tax need to be applied when there are buy / sell / transfer events. And this rule is a massive loophole that allows people to preserve, I’ll say it again, totally untaxed wealth… to benefit their immediate family.

If you cgt on main properties then it needs to be on every move, not penalise people who have stayed put for 60 years.
However if you did it on every move then people would lose capital on a move and would not be able to upgrade.

Dh owns a business. He'd rather sell it than have to pay CGT and loads of tax on it if he passes it down.

Sick of this stupid government already. If they'd just put a penny on income tax all.of this arcane bollocks would have been avoided.

But they would still have made a profit that would fund their upgrade?

You assume wrong.

You can pass on up to £1million in property before IHT is applied as long as you’re in residence.

Also - “The average earner in the UK now has the lowest effective personal tax rate since 1975 — and one that is lower than in America, France, Germany or any G7 country.” see IFS. Tax burden is tax as a share of national income, not the amount you personally pay.

Lowering the inheritance tax threshold (which seems a good idea to me) oight to achieve a lot of this? (I say this through gritted teeth as it is quite likely to affect me if it happens, but looking objectively I know it would be right)

Of course the richest people will work out ways to avoid either 🙄

Oh, can you imagine the outrage if they did this? It would be the sensible thing to do, though.

It's the fairest thing to do. It would affect everyone working equally.

FFS. This is the problem with this country … everyone’s first reaction is me me me me me, but when public services go to pot it’s bad bad bad bad bad…. Must be fixed but someone else has to pay.

There are business reliefs on IHT for this reason.

Much of capital gains is due to inflation. Even my house value has only risen by inflation since I purchased it over a decade ago.

It doesn’t seem right to tax a notional gain in addition to inheritance tax. I do believe inheritance tax allowance should be much lower though.