Tax Valuations
Probate & Inheritance Tax
What is Inheritance Tax (IHT) and Probate?
When a person passes away their estate (e.g. money and possessions) needs to be managed. This legal process of managing their estate is known as Probate. The individual who deals with the deceased person’s estate is known as an administrator or executor, such as a solicitor. The estate may also include property, such as the deceased person’s home.
Usually when someone passes away inheritance tax is paid on their estate in line with the Inheritance Tax Act 1984. The executor or representative dealing with the estate will need to provide a value of the estate which is to be submitted to HM Revenue & Customs (HMRC). Inheritance tax may also apply on trusts or if a property is gifted to someone during their lifetime.
Are there any exemptions or relief?
Normally there is no Inheritance Tax to paid if either:
– The value of the estate is below the £325,000 threshold
– Everything above the £325,000 threshold is left to a spouse /partner or charity.
Where the property is given to children or grandchildren the threshold can be increased to £500,000.
There are circumstances where the Inheritance Tax rate is reduced on some assets. If 10% or more of the net value (total value of the estate less any debts) is left to a charity, in the will, then the tax rate is reduced to 36%.
Another type of relief depends on when the property is gifted. A taper relief may apply to the taxable amount which is related to when the property was given to when they passed away. It maybe less than the standard tax rate of 40%.
There are other tax reliefs, such as Business Relief, where some assets can be passed on at a reduced tax bill or free of Inheritance Tax.
Usually when someone passes away inheritance tax is paid on their estate in line with the Inheritance Tax Act 1984. The executor or representative dealing with the estate will need to provide a value of the estate which is to be submitted to HM Revenue & Customs (HMRC). Inheritance tax may also apply on trusts or if a property is gifted to someone during their lifetime.
Key Contact
How much tax do I pay?
The standard rate for Inheritance Tax is 40% and applies to the part of the estate above the threshold. For example, if the estate is worth £625,000 and the tax free threshold is £325,000. In this instance, the difference above the tax free threshold is £300,000. This amount is subject to the tax.
The above information should be viewed for illustration purposes only. We would recommend advice is obtained from a suitably qualified independent tax advisor.
How Blackacre can assist
We as RICS chartered surveyors also part of the Registered Valuer Scheme can prepare a valuation report in accordance with HMRC standards. This is so that the report prepared is up to standard and greatly reduces the possibility of the district valuer, who acts for HMRC, querying the valuation.
Capital Gains Tax
What is Capital Gains Tax?
With UK owned property Capital Gains Tax relates to the increased valued made when selling a property. It also applies when disposing of a property which includes gifting or transferring to someone else, swapping it for another asset or obtaining compensation (e.g. insurance payout).
The increase in value from when the asset was bought is known as the gain (or profit) which is the amount to be taxed. It is not the total amount the asset was sold at. For example, if the property was purchased for £400,000 and later sold for £500,000 there is a “gain” of £100,000. This “gain” is subject to the tax.
Are there any exemptions or relief?
If the property is your main home (or only home) and you have genuinely lived within this property for the duration of time that you have owned it, you can benefit from Private Residence Relief (PRR). This means that you will not be liable for the CGT.
There are situations when CGT may apply or there is some tax that needs to be paid. For example,
– Where your home or part of it has been used exclusively as business premises
– Converted part of the property in flats
– The property or part of it has been let
– The grounds and buildings are larger than 5,000 square metres in total
– The property was intentionally purchased for a gain (e.g. property development)
In the scenario that you have a second home or the asset is a buy-to-let investment usually the CGT will apply and there is no relief.
How much tax do I pay?
Where Capital Gains Tax is applicable the rate will vary depending on your income, the size of gain and if the gain has exceeded your annual allowance. Typically for residential property the tax rate on the gain may be 18% or 28% depending on your own individual circumstances.
The above information should be viewed for illustration purposes only. We would recommend advice is obtained from a suitably qualified independent tax advisor.
How Blackacre can assist
If you require a HM Revenue & Customs (HMRC) compliant valuation report for capital gains tax purposes, our RICS qualified registered valuers can assist. We will ensure the formal valuation is finished in accordance with Inland Revenue and the District Valuer’s requirements.
ATED (Annual Tax on Enveloped Dwellings)
What is Annual Taxation on Enveloped Dwellings?
For companies that own UK residential property they may be liable for tax which is known as Annual Taxation on Enveloped Dwellings (ATED). An ATED return will need to be completed if certain criteria are met. Typically, the criteria being the property is a dwelling within the UK, it is owned partly or completely by a company or partnership and the property is valued more than £500,000.
The Finance Act 2013 introduced ATED with this tax being effective from 1st April 2013. The valuation date of the property is dependant on when the property was initially purchased. The valuation dates are known as an initial valuation date and the revaluation date.
The initial valuation date will be either
– 1st April 2012 for the properties owned on or before this date
– The date the property was purchased if it is after 1st April 2012.
The revaluation dates for all properties are fixed every 5 years after 1st April 2012 regardless of when the property was purchased. The revaluation date will be, for example, 1st April 2017, 1st April 2022 and so forth. There are also different situations when a revaluation is required, such as disposing part of the property (e.g. selling a small parcel of land)
Are there any exemptions or relief?
There are some instances where ATED does not apply. Certain property types are exempt from ATED as they are not deemed to be a dwelling for ATED purposes. These being:
– Care homes
– Hospitals
– Hotels / Guest Houses
– Student halls of residence / boarding school accommodation
– Prisons
There are circumstances where tax relief applies and can result in the reduction of the ATED charge. For example, if the property is let on a commercial basis to a third party, owned by a registered provider of social housing, open for 28 days a year to the public and held as trading stock of a property development.
How much tax do I pay?
The amount paid is based on the value of the property as at the valuation date and the banding system of that year. The banding system and chargeable amounts differ and will vary depending on the year the property is to be valued and that year’s relevant banding system. For example, the banding system and chargeable amounts as of 1st April 2022 to 31st March 2023 are:
| Property Value | Annual Charge |
| More than £500,000 up to £1 million | £3,800 |
| More than £1 million up to £2 million | £7,700 |
| More than £2 million up to £5 million | £26,050 |
| More than £5 million up to £10 million | £60,900 |
| More than £10 million up to £20 million | £122,250 |
| More than £20 million | £244,750 |
The above information should be viewed for illustration purposes only. We would recommend advice is obtained from a suitably qualified independent tax advisor.
