Inheritance Tax Article MoneySavingExpert.com Discussion

exil

On the basis of what you've told us, yes, on the amount above the threshhold which is £300,000 - so, 40% of £125,000 or £50,000.

The key is that the tax doesn't depend on how the inheritance is split but on the total estate.

HexusOdy

I'm sorry if this has been asked before but I couldn't find it anywhere.

My partners parents recently inherited their uncles estate when he died in August. Its still going through the motions as shares and other assets are sold but before they have got a penny they are being told they have to pay £35,000 in inheritance tax BEFORE they can get the inheritance. They don't have that kind of money.

Surely something is wrong here?

Johnhowell

HexusOdy wrote: »

I'm sorry if this has been asked before but I couldn't find it anywhere.

My partners parents recently inherited their uncles estate when he died in August. Its still going through the motions as shares and other assets are sold but before they have got a penny they are being told they have to pay £35,000 in inheritance tax BEFORE they can get the inheritance. They don't have that kind of money.

Surely something is wrong here?

Hexus,
I assume your partners parents are to be the executors of their uncles estate. Paying before issuing of probate is usual. The probate office should have outlined methods for paying this. A bridging loan is the usual method.

Regards,
John

oh2beunger

Hi
You mention discounted gift scheme to reduce inheritance tax. About 3 months ago we set in motion just such a scheme intending to cash in various other savings to fund it to the amount of £100,000.and planning to take an income of 7.5%. We were just on the point of signing on the dotted line when the markets all crashed and we would need to cash in quite a few more of our savings to realise this amount. I appreciate that although I would be selling cheap at the same time the Discounted Gift Sceme Fund would be able to buy cheap.

Do you think this is a good time to go ahead or should I wait until the market settles down? I am 62 and my husband 77.
Thanks

303stainless

My wife's late husband died more than 7 yrs ago since when she has paid rent for half the value of her house to her children, who inherited her husband's share. Does she still need to carry on paying rent, now 7 yrs has elapsed for the children to retain their ownership of half the value of the house or do the benefit in kind rules still apply? The children do not need the money.

localhero

My wife's late husband died more than 7 yrs ago since when she has paid rent for half the value of her house to her children, who inherited her husband's share. Does she still need to carry on paying rent, now 7 yrs has elapsed for the children to retain their ownership of half the value of the house or do the benefit in kind rules still apply? The children do not need the money.

Yes the gift with reservation of benefit (GROB) rules apply whilst a benefit is retained however long that may be. It is very important that a market rent is paid up to the death - as if it's not a market rent you will fall foul of HMRC and they will simply add it back into the estate.

jandd

If a couple has been together for some years and own their own home together, do they get the same tax benefits as a married couple?

John_Pierpoint

Of course not - tax is based on law, every year a new law has to be written for the new taxes.
I don't think there is a legal watertight definition of girlfriend or boyfriend, when you fill in the IHT400 and get to the sub form, on which you ask to be given back 130K of the tax calculated so far.
Why not phone up the tax office and ask for a set of forms now, to see what you will be up against?
This is one tax where you cannot go on-line and do "what if" calculations.
Of course if ALL the wealth thou hast, which includes the interest on your savings, you have not been paid yet, (less your liabilities) is within the "nil rate band" for IHT, there are only the, un-allowable for tax, expenses of gaining probate, to be considered.

Keep it simple and you can do it yourself, especially if the total is within the nil rate band.

Don't forget that the one left behind, is likely to need to do a final manual Income Tax return or two - so make a will to show who get what and who is the executor even if you think everything is in joint names. Otherwise your partner's relatives will get in on the act, making you a bit player at the funeral.
http://www.hmrc.gov.uk/rates/iht-thresholds.htm

You can make a will and/or get married "on your death bed" - I know people who have done so.

Hickey

My husband unfortunately died in 2003 - the house is/was in joint names and any savings he held in his own name did not amount to the threshold so no IHT paid. Am I correct in thinking that when I die as well as the £325,000 as my personal threshold, my children will also be able to claim his £325,000 which wasn't used, thereby making a threshold of £650,000 before any inheritance tax becomes due?

John_Pierpoint

Assuming that your husband left everything to you, then when you die your estate will benefit from two nil rate bands for Inheritance Tax purposes as the then ruling rate. Currently that nil rate band is 325K.

However if your husband had left his Rolls Royce motor car (Probate value 50,000 GBP) to his favourite nephew, when he died (conveniently for Income Tax purposes) on the 5th April 2003, then he would have used up 50K of his 250K allowance and so only 80% of a second nil rate band would be available upon the second death. When the time comes your executor has to be able to prove what happened at the first death, so keep the evidence together with, but not pinned to, your own will.

http://www.hmrc.gov.uk/rates/iht-thresholds.htm