This week we’ll look at some CGT Tips when selling property. I’ve been sorting out the taxes on several property disposals over the last few months. None have been straightforward. It’s not that they have been difficult but there have been little quirks in each case. I want to give you some tips. This should help you get the calculation right and not pay more than you should. We’ll look at
- Estate selling property
- Gifting Property
- Enhancement Expenditure
- Completing CGT Returns
Estate Selling Property
An Estate selling property arises on the death of an individual. Say Pat Murphy passed away on the 1st of February 2023. Under his will, he appointed his son Billy as executor of his estate. In his will, he instructed the executor to sell the family home. After that, the net proceeds were to go to Billy and his sister Mary. Billy gets a valuation of the property at the date of death for €300,000
It is now February 2024, and the grant of probate has been issued. Billy puts the house up for sale and it sells for €350,000 on the 14th of February. So, there’s a gain of €50,000 and Billy thinks there’s Capital Gains Tax to pay but isn’t sure what happens next.
What happens next is the Estate must register for taxes. There is a paper TR1 form to do this. After that happens Revenue will issue a tax number for the estate. Then, Billy must complete the CGT computation, pay the tax, and file the CGT return.
CGT Computation
The CGT computation looks like this
| Sales Proceeds | €350,000 |
| Less Legal Fees | (€2,500) |
| Less Auctioneering & Accountancy | (€5,000) |
| Less Probate costs | (€6,000) |
| Less Value at the date of death | (€300,000) |
| Gain | €36,500 |
| Tax Payable 33% | €12,045 |
It’s my understanding that the legal fee to take out probate is an allowable deduction. Plus, there is no annual exempt amount of €1,270. Now that we know the liability, when do we pay it and file the return?
Payment and Filing
The payment and filing dates are different. As the liability arises in the first 11 months of 2024 the payment date is the 15th of December 2024. That’s the latest date for payment and Billy can pay it before then. It’s common for executors to clear the liability when they know what it is.
As the disposal happened in 2024 the filing deadline is the 31st of October 2025. This is on a form CG1. Executors mustn’t forget to file the return as failure to file on time can lead to a surcharge of 10% of the liability. Say Billy forgets to file the return by the due date. He files it in February 2026. Even though the tax liability is paid there will be a surcharge of €3,650.
Gifting Property
Two recent cases spring to mind here. The first was the transfer of a house to a son. Mary Flynn bought a house in Kilkenny in September 2014 for €40,000. As her breath was taken away by Waterford’s wild beauty and stunning coastline, she never moved in. Crazy when you think of it given Kilkenny is such an amazing spot.
She wants to give the house to her son Frank. But she doesn’t want to pay lots of tax on the transfer as no money is coming her way. The current value of the house is €160,000. Mary transfers it to him in June 2024
CGT Computation
| Current Value | €160,000 |
| Less Legal Fees | (€2,000) |
| Net Value | €158,000 |
| Less Cost | (€40,000) |
| Less Stamp Duty & Legal on Purchase | (€2,500) |
| Gain | €115,000 |
| 7-year relief [84/117] * | (€82,923) |
| Net Gain | €32,577 |
| Personal exemption | (€1,270) |
| Taxable Gain | €31,307 |
| Tax Payable 33% | €10,331 |
* 7-year relief where property purchased between 7 December 2011 and 31 December 2014
Offset CGT against CAT
It’s possible to offset CGT against CAT. When gifting property another tax that can arise is Gift tax or CAT. In Mary Flynn’s case, while there was a gift to her son, no gift tax arises as the value is below the threshold of €335,000. That’s the Group A parent/child threshold. But it is relevant in another case that crossed my desk.
Jim Dunne bought an apartment in Youghal in 2016 for €65,000. He intended to use it for holidays as he grew up in the area. But owing to health reasons he only stayed there a handful of times. He knows his niece Teresa loves the place and spent a lot of time there over the last few summers. Jim decides to gift the property to Teresa but wants to minimise the tax. The apartment is worth €150,000 now.
CGT Computation
| Current Value | €150,000 |
| Less Costs of Transfer | (€2,000) |
| Net Value | €148,000 |
| Less Cost | (€65,000) |
| Stamp Duty & Legal on Purchase | (€2,650) |
| Gain | €80,350 |
| Less Personal Exemption | (€1,270) |
| Taxable Gain | €79,080 |
| Tax Payable 33% | €26,096 |
We get Jim to pay the tax liability now. This is because the tax must be paid to offset the CGT against the CAT. But the CAT or gift tax liability falls to Teresa.
Gift Tax Computation
| Value of the gift | €150,000 |
| Less small gift exemption | (€3,000) |
| Net value | €147,000 |
| Less Group B threshold | (€32,500) |
| Taxable Value | €114,500 |
| Tax Payable 33% | €37,785 |
| Less offset CGT against CAT | (€26,096) |
| Balance to pay | €11,689 |
Enhancement Expenditure
Enhancement expenditure is when you enhance the property. And that enhancement is there when you sell the property. An example would be a garage you built onto your house for €10,000. When you sell the house, and the garage is there when you sell it, you get a deduction for the cost. But say a few years after you convert the garage to a dining room. That costs you €25,000. You don’t get a deduction for the garage cost, but you do for the dining room cost.
I’ve seen a few cases where older clients are selling a second property. They have owned the property for a long time and have done some work on the property but don’t have records going back that far. What we try and do in these cases is to find out what, when, and the cost. We rely on the memory and the honesty of the client so we can do an accurate computation.
Tom O’Neill sold a house in Navan in 2024 for €400,000. He bought the house in March 1980 for £3,000 and legal fees of £300. He had to do a lot of work on the house over the years and an example of some of this is
- £4500 removed bathroom built onto the rear of the house. Converted a bedroom into a bathroom and fitted new walls and a new floor – 1984
- £5800 replumbed the house and fitted a new central heating system – 1986
- £8250 – paid for a company to drill the walls and pump insulation in to stop rising damp and new roof – 1987
Indexation Relief
Indexation applies to costs incurred before 2003. This works by multiplying the cost by the indexation factor for the year you incurred the cost. In the years before 2001, the tax years ran from the 6th of April to the 5th of April, matching the UK. When chatting with Tom, he told me he did most of the work in the Summer when they were in the house on holidays. So, work done in the summer of 1984 would fall into the year ended 5th April 1985. The index factor for that year is 1.819. We will also need to convert Irish pounds to euro.
CGT Comp – Enhancement & Indexation
| Sales Proceeds | €400,000 | |
| Less Costs of Sale – Legal etc | (€15,000) | |
| Net Proceeds | €385,000 | |
| Less Cost 79/80 €4190 | 3.742 | (€15,679) |
| Enhancement 84/85 €5714 | 1.819 | (€10,393) |
| Enhancement 86/87 €7364 | 1.637 | (€12,056) |
| Enhancement 87/88 €10475 | 1.583 | (€16,582) |
| Gain | €330,290 | |
| Less Personal Exemption | (€1,270) | |
| Taxable Gain | €329,020 | |
| Tax Payable 33% | €108,576 |
Completing CGT Returns
Completing CGT returns can be awkward to get them right. We even experience this in the office trying to get to the next page but the numbers don’t add up. Or we haven’t filled in the right box! When claiming reliefs, completing the CGT return is even more challenging. You need to get the CGT return right. This ensures that your CGT assessment will issue quickly plus reduce Revenue queries.
I had a recent meeting to help someone fix the CGT return he completed. He didn’t owe any CGT because he sold his home but the numbers he put in his CGT return resulted in a letter from Revenue.
Revenue can improve its service by having current-year forms available to taxpayers. I find that older taxpayers want to pay the tax and file the return at the same time. Get it all done and out of the way in one go. There are no 2024 CGT return forms available. We have to change the dates on the 2023 return. There isn’t even an editable version of the 2023 return that I can find which means we are back to pen and paper.
But, in fairness to Revenue, when we submit the returns, they are quite quick to issue the CGT assessments.
In all cases, I find that clients want to make sure things are right. People are different. Some will have every scrap of paper for the last 30 years and others will throw everything out. Taxpayers must keep records for 6 years. After that, it’s up to trust and honesty and putting your best foot forward to reduce your liability. But above all, sleeping comfortably if Revenue come calling.
Are you selling a property and need help with your taxes? If so, start here
