My father, our last surviving parent, died about a year ago. The value of his estate was less than the threshold for inheritance tax. My brother and I are sole beneficiaries and I am the sole executor. We decided between us to spend some of the liquidated assets to improve the property, mainly to increase its desirability so that it wold be sold quickly. We have now sold the property and partly because of market increases and partly because of the improvements the value has increased by £40,000. We invested less than £10,000 and did a lot of the work ourselves. At this new value we have exceeded the inheritance tax threshold for
2005, £275,000 by about £36,000. Is the estate now liable for inheritance tax or are we as individuals each liable for capital gains tax?I believe CGT. We inherited the property at the value on the day of my father's death and so any improvements we made are outside of the administration of the estate. My brother thinks I should declare inheritance tax and try and claim the property development costs as an executor's expense. Looking at the forms for inheritance tax I can't see quite how I can do this.
Who is right?