Tax/investment folks: advice please?

Mrs W’s dad died just over a year ago and left us a surprising amount in shares investments. After settling the inheritance tax bill we are in the process of buying a house, planning on selling the funds and buying in cash so we can continue to live in our present home while we get some work carried out.

My worry is that when those funds drop into our bank account they will become part of our income for the year and taxed again accordingly.
Am I right ?

I think you would need to pay CGT on any increase in the value of the shares that took place after the inheritance date.

My worry is that when those funds drop into our bank account they will become part of our income for the year and taxed again accordingly.<br style=”box-sizing: border-box; –tw-border-spacing-x: 0; –tw-border-spacing-y: 0; –tw-translate-x: 0; –tw-translate-y: 0; –tw-rotate: 0; –tw-skew-x: 0; –tw-skew-y: 0; –tw-scale-x: 1; –tw-scale-y: 1; –tw-scroll-snap-strictness: proximity; –tw-ring-offset-width: 0px; –tw-ring-offset-color: #fff; –tw-ring-color: rgb(59 130 246/0.5); –tw-ring-offset-shadow: 0 0 #0000; –tw-ring-shadow: 0 0 #0000; –tw-shadow: 0 0 #0000; –tw-shadow-colored: 0 0 #0000; color: #000000; font-family: Roboto, ‘Helvetica Neue’, Arial, ‘Noto Sans’, sans-serif, -apple-system, BlinkMacSystemFont, ‘Segoe UI’, ‘Apple Color Emoji’, ‘Segoe UI Emoji’, ‘Segoe UI Symbol’, ‘Noto Color Emoji’; background-color: #eeeeee;” />Am I right ?

No, they’re not treated as income when you sell, but any increase in value between when you inherited them and when you sell them will be subject to capital gains tax.

If no/minimal increase in value then no cgt.

CGT tax-free allowance is £3k for 2024/25.

Have you taken any advice from a tax accountant? That would have been my start point.

As others have said, you’ll need to pay Capital Gains, a) if you’ve made a gain, and b) at a rate related to your income tax band.

https://www.gov.uk/tax-sell-shares

You do have a £3000 tax-free allowance though, which may mitigate some of the bill.

https://www.gov.uk/capital-gains-tax/allowances

not sure the ‘surprising’ amount definition :0)

Capital gains is £3k each, is the inheritence in joint names, single name.

PS. if you are buying a new house to do up and then sell your old home, you may have tax implications when selling the old house.. again speak to  a tax accountant for eligible timeframes and rules..

Can you get 20k put into an S&S ISA wrapper? But as above best speak to a professional

Can you get 20k put into an S&S ISA wrapper? But as above best speak to a professional

Yes and No.

Yes you can do it but it selling (or transferring) the shares in order to put it into an ISA still triggers a potential CGT liability.

Get some advice.

But my simplistic understanding is that if probate (or equivalent) has been granted and the shares/funds transferred into your name, you would be liable for CGT and tax on dividend income or interest from that date.

If you take advice please make sure you understand how much the “independent” advice is going to cost you. Some seriously expensive advice out there for stuff that can be basic and in the public domain.

It’s really covered in this thread. Not sure what an independent advisor can offer, unless the sums are so large it’s worth rerouting them via an offshore company in the Caymans…

No idea how many shared the ‘rittance, and when it was, but you may well be on the hook for some CGT on the <b></b><b>increase in</b><b> </b><b>value only</b> since you inherited it.

**** UI

Thanks all. CGT on any increase in value sounds reasonable.

we originally expected the funds to go directly to the solicitor dealing with probate and from there directly to the vendors. We since found that the investment funds want to pay it into our current account as my wife is their client. That’s what set alarm bells ringing about whether this would count as income or not.

I don’t earn enough to pay income tax, my wife pays at basic rate PAYE from her teachers’ pension. The inheritance is in her name but we only have a joint account.

We understand that if we don’t sell our house immediately we have to pay a higher rate of stamp duty but we get a rebate if we sell in 3 years.

That’s what set alarm bells ringing about whether this would count as income or not.

It’s not income merely because it’s paid directly to your OH instead of via the lawyer. It was still part of the estate and it’s still covered by whatever the final inheritance tax bill (if any) was. In the very unlikely event of HMRC coming along later and saying “what’s this payment about then?”, you’ll just send them the paperwork showing it was all taken care of and any tax paid as part of probate. The probate lawyer could answer this off rhe cuff.

PS condolences and good luck for the future house.

I doubt very much ‘It’s all covered in this thread’.

The sensible approach, in my view, is to get prices for professional advice and then decide whether or not to pay the fees.

An individual who is not a financial planner or tax accountant is unlikely to structure their financial affairs as efficiently as possible – nor are they likely to fully understand the tax implications of how they utilise their inheritance.

The value of the shares inheritance is a/the key consideration.

An individual who is not a financial planner or tax accountant is unlikely to structure their financial affairs as efficiently as possible –

And a lot of the professionals working in the field are either **** useless or corrupt, so anything the OP can learn fir himself to protect himself is well spent

“My worry is that when those funds drop into our bank account they will become part of our income for the year and taxed again accordingly.”

The funds are not income. Any interest will be. When my siblings and I inherited from our dad there was in question of that being taxed as income. None of us had any issues.

If you are a non taxpayer and there is going to be cash in your account (not in an ISA) then transferring it into your name rather than joint names means there is no tax payable on interest until the total of your earning and the interest is over the basic rate tax threshold. You would of course need to transfer them from the joint account to a sole account in your name.

If you are going to be holding cash for an unknown period pending a house purchase you could each open a cash ISA. £20k each.  With the remaining cash in your name it would need to be a big sum to attract tax if your earnings are well below the tax threshold.

For example £160k at 5% is £8k.  But only around   £5k in this tax year. So if you  earn £7k no tax to pay. If you were still holding cash next April another £20k each into ISAs.

Let’s say, after IHT was paid, your wife inherited £400K in shares 12 months ago and that these shares are now worth £440K.

If she sells them now she will have made a gain of £40K. She has an allowance of £3K* so will need to pay CGT on £37K.

Let’s say has a pension of 20K. To work out the CGT tax rate add this to the gain = £57K. She will pay 10%** on 30,270 and 20%** on £6730. (The threshold is the higher rate tax band – currently £50,270)

Your wife can transfer shares to you free of charge so as a couple you would be able to benefit from two CGT allowances and probably eliminate any 20% liability if you think it’s worth the effort.

* bet this goes down soon

** bet this goes up soon

the generalist – I take it that your ‘informed comment’ is based on personal experience.

No? Didn’t think so.

My personal experience of and dealings with tax accountants and financial planners has been positive. You don’t pick up what they know from a bit of reading up and google searching.

An individual who is not a financial planner or tax accountant is unlikely to structure their financial affairs as efficiently as possible

Statements like this are akin to someone asking about truing a wheel or bleeding disc brakes and being told “ooh, you better take it to a bike shop, doing it yourself is too risky”. IMO.

Like others on STW (and probably opining on this thread), I spend as much time reading investing and personal finance forums/blogs as I do mountain biking stuff. It’s honestly not too mystifying for the average PAYE-paid individual.

If you’re self-employed we’re probably talking more rear shock servicing levels of complexity 😉 .

Be warned that if the bank goes under, your deposit with them is only covered to the tune of 80k (per account holder, per bank). I’d consider spreading the money around asap if there’s a lag between getting hold of it and buying the property.

(haven’t checked whether 80k is the current figure, it used to be.)

the generalist – I take it that your ‘informed comment’ is based on personal experience.

Yes obviously.  In general terms, people are fallible. And indeed a lot of them are arseholes ( myself included 😉 )The people the OP chooses are people, just like the rest of us.. so the more he knows the better protected he is.

In terms of specifics:

The arsehole MA who sold us out first mortgage based on repayments of £x pcm, which turned out to be complete bollocks as the payments were around £2.5x pcm. I think he showed us the IO repayments and passed them off as Repayment payments

Or the solicitor who sold my parents a trust will setup thing to mitigate IHT, which then cost almost £30k to unwind.  Not sure who I am pissed at there… the one that set it up or the one that unwound it.

My personal experience of and dealings with tax accountants and financial planners has been positive.

That’s great, but it doesn’t mean everyone else’s is.  There is a variety of opinion out there and I’m adding mine to the pile for consideration, if that’s ok?

Special thanks to @Donald for this insight.

also @thegeneralist We won’t hold the money in our account all in one go. As soon as a sum lands it’ll be off to the solicitors doing the conveyancing. The idea is that we don’t request our money from the funds until we have exchanged contracts and the risk of the sale falling through is gone. That way we won’t risk selling all the funds only to find we have £400k in our current account and nothing to spend it on except c&h.