What capital gains tax will be due when my daughters inherit my flat?

Q I am an elderly widower. When I die I expect to leave my entire estate to my three daughters.

Part of that estate is a flat that I bought in 1997 for £68,000 but which is now worth about £250,000. What capital gains tax would be due – if any – when my daughters inherit? They will also inherit the family home, which has a current value of about £550,000.

I believe they will benefit from the tax rule that applies the tax allowance of myself and also of my late wife who died five years ago. I don’t want to leave them a tax bill as they will be in no position to deal with it. They are going to need everything I leave them to simply be housed and get by. I am quite concerned and would appreciate your advice.

There is no capital gains tax (CGT) when an asset such as your flat is inherited but there might be a bill if your daughters decided to sell it. However, it is likely to be a small one because the taxable gain (or loss) will be the difference between the flat’s value on the date of your death (so not its value when you acquired it) and what they managed to get for it less estate agent fees and legal costs. For there to be a tax bill, the taxable gain would have to be more than £36,900, which is three times the £12,300 CGT exempt amount that each of your daughters is entitled to in the 2020-21 tax year (assuming they have no other gains to set against the exempt amount).


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