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?

Agree with importance of enjoying your money. But anyone who has saved has made money from saving, unless they’re stupid enough to have kept it in the bank. That’s the only bit we are talking about, the gains that have been made.

lol!!!!

Send her off for a fortnight in Magaluf!

"It isn’t different, that was just an example. I think indexation should be applied to capital gains in general, I recall this being a thing back in the 1980s when I studied tax law - can’t remember if it was just for share prices though. Obviously rates would have to go up to compensate.

Sticking to the general principles that money/assets are taxed when they change hands and only taxed once per transfer, I don’t think IHT and CGT could be applied to the same thing at the same time.

I’d like to see a lifetime allowance for inherited wealth for the beneficiary, too. That would encourage the wealthy to spread their legacy wider. Also an end to the Duchy of Cornwall claiming estates with no will or relatives - that money should go to the taxpayers."

Yes indexation was a thing. Until early 2000's (can't remember the exact year) and it was on all assets. The idea was to encourage people to hold on to investments. Rather buy and sell quickly to make a quick gain.

Was replaced with taper relief - similar principle longer the asset was held the bigger the relief. Business assets were quicker to get relief than non business.

Then that was replaced with entrepreneur relief (now essentially business asset disposal relief) so assets bought for personal gain get no relief.

Indexation was supposed to stop tax on inflation. Only the underlying gain would get taxed.

Yes, they did.

Send her for a fortnight at centre Parcs in the schools holidays 😂 that’ll soon get the value of her estate down

We are definitely encouraging her to rent a lovely villa that we can all go to!

Ha ha yes

@DotPotato

"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)."

While that is partly correct. They are taxed when withdrawn or are you suggesting double taxation on pensions?

You should perhaps RTFT to see that I know this area pretty well.

Taxing a pension when it is withdrawn (it’s income) is completely different to taxing something when it is inherited (it’s an asset).

At the moment, you can pass on pension savings outside of your estate meaning that they are not included in any IHT liabilities. This is unfair and there’s no rationale for it at all, this will go in the budget.

With regards to “double taxation”, this is a term banded round like “subsidise”… by people who don’t want to pay tax but don’t really understand the system. There’s nothing wrong with taxing something twice, it’s exactly what VAT does for example. IHT also taxes some things again, but in many cases it is applying a tax to wealth that has never been taxed because it was held in unrealised gains. Stamp duty taxes money twice. I could go on.

However in the case of taxing pensions at death it wouldn’t be double taxation, because the person who accumulates the pension would pay tax on it ONCE (through withdrawal, CGT or IHT… choose your position). The person inheriting would then only pay tax once through the same mechanisms.

Unless you can think of a good reason that pensions should remain exempt from tax (beyond an individual’s own personal gain).

so we are selling FIL house in London bought in the v early 80s for £5000 are you genuinely suggesting we (middle class one of whom just happened to grow up in an area of London that has only just become desirable) should pay CGT of 45% on the entire sum received

whereas because my grandparents both sold and moved into retirement properties the CGT on those would have been minimal indeed one due to the agreement was sold back to the management firm at the price it was bought thus avoiding all tax

@DotPotato your aggression and assumptions make me stop reading anything you have to say.

Yeah, well said!

“I like to pay taxes. With them, I buy civilization.” ― Oliver Wendell Holmes Jr.

The £1million applies to couples who are married/in civil partnerships. Not to single people where the maximum is £500K of which £175K is for passing on your home to your heirs

“Taxes are essentially an annual subscription to the country you live in. Childhood is a free trial” – Anon