Capital Gains Tax on inherited house

[Summer123]

I am one of the executors of a will and we are currently looking at applying for probate.

Not wishing to overcomplicate my questions I will try to stick to the relevant details. Please note that I am not seeking to evade tax and do not want HMRC coming after me at a later date! But of course I also don't want to do something that results in more tax being paid than necessary.

Issue 1:

In the will I have been left a share of the house where I already live. I do not own or rent any other property, so it is definitely my primary residence and I am the only person living there. However, of course I was not the owner of the house. A valuation has been carried out on the house and with the other assets the total value of the estate will be over £1Million, so inheritance tax will need to be paid.

My understanding is that if the house is sold for more than the value used in the calculation of inheritance tax, that capital gains tax will be payable on the difference. However, I also understand that capital gains tax is not normally payable on increases in the value of your primary residence.

So my question is, which would apply in my situation? If I sell my share of the house for more than the (proportionate) amount in the valuation for inheritance tax purposes, am I exempt from capital gains tax or will I still need to pay it?

Issue 2:

The executors of the will are also the beneficiaries and inherit equal shares of the house and other assets (I am the only one that lives in the house). The house cannot be sold until probate is granted, but I gather that the executors/beneficiaries (who are the same people) can agree a Deed of Variation to alter the distribution of the assets. If the executors/beneficiaries want to resolve the ownership of the house without waiting for probate to be granted, can they do this by one buying out the other interests with their own money now and using a Deed of Variation? Then when Probate is granted one executor/beneficiary would inherit 100% of the house, having already paid the other beneficiaries for their share. If this is permitted, then we return to the question about whether if I sell my share of the house (with it being my primary residence) to another executor/beneficiary, would capital gains tax would apply to any increase in the value of my share of the house?

If you can give legal clarity to any of the above it would be much appreciated.

[Pezza54]

Hi
Welcome to LB
No CGT if the property is still your primary place of residence when you sell your share
The executor(s) need probate before they can sell, or transfer the property into beneficiaries shares

[Summer123]

Hi
The executor(s) need probate before they can sell, or transfer the property into beneficiaries shares

Thank you.

I was thinking that for legal purposes the transfer would indeed take place when probate was granted and a single beneficiary getting 100% of the house would be covered in the Deed of Variation which would then come into effect, But I was hoping that if we go down that route the monetary value could be paid between beneficiaries (with nothing coming from the estate at this stage) at an earlier date. Is that just flat out not possible?

[Pezza54]

A deed of variation can be executed before probate.
What would happen if a non-beneficiary challenges the will and the will is found to be invalid? The deed of variation is invalid.
The beneficiary who has paid other beneficiaries for their shares will want his or her money back.
Beneficiaries would have to agree if the deceased's estate or future owner pays utility bills, council tax etc up until the date of transfer.
Another possible but unlikely scenario is the property has to be rebuilt after serious fire damage. As it would be built to modern day standards it would significantly increase in price. Beneficiaries may be unhappy that the future owner is benefitting from this.
A deed of variation should be drafted by a probate solicitor, covering all potential events