Capital Gains Tax.

Whether you inherit a portfolio of shares, a rental property or family heirloom you shouldn’t need to pay CGT straightaway.

But, if you sell your inheritance further down the line, you might need to pay CGT at that point.

For this reason it’s important to have an accurate valuation of the asset as soon as you inherit it.

Even though you may not have to pay CGT when you get an inheritance, it’s important to know that you might have to pay other taxes on it over time.

You might have to pay income tax on rent payments for example, or dividend tax on investment income.

Capital gains tax may be payable when you sell shares – this includes either direct holdings or shares within a mutual fund.

But you won’t need to worry about CGT if those shares or funds are held in an ISA or a pension.

Importantly, you won’t normally pay CGT on corporate bonds, government bonds or cash accounts. Shares held in an employer’s share incentive plan (SIP) will also be exempt.

Different rules apply when you sell property.

In addition to paying a higher rate (28% for higher rate tax payers and 18% if you pay the basic rate), you also need to report your gain to HMRC within 60 days – you can’t park it until your next tax return.

You don’t need to pay CGT when you sell your home (your main or primary residence) – it’s only payable for other properties you might own.

This could include a rental property, second home or business premises.

If you are selling a rental property that was previously your main home, you might be entitled to claim private residence relief to reduce the size of your bill.

Sometimes you’ll need to sell assets that you own jointly with someone else.

In these cases you can both take advantage of your capital gains tax allowance and your capital gains will be based on the proportion of the asset that you own. So, if you own the asset 50/50, the gain will be split equally between you. If you only own say, 25% of the asset, you’d only be liable for 25% of the gain.

When you declare your capital gains you’ll be asked what the date of disposal was.

This needs to be the point at which a contract to sell became binding. So, in the case of property, that means the date contracts were exchanged and not the date the sale completed.

In some cases you may not receive all the sale proceeds straightaway.

If you know the amount of money you are likely to receive, you would normally need to factor that into your gains calculations.

However, as you may not have the necessary funds to pay your CGT, HMRC may allow you to pay the tax you owe in instalments.

Where the exact proceeds are not known, it’s a bit more complicated. You would need to consult HMRC and value each payment separately.

CGT in Scotland operates in the same way as the rest of the UK. But it’s important to note that the rates payable are linked to UK tax bands, not the income tax bands used in Scotland.