Query about home ownership and Inheritance tax

chazza

hey all,

my mum, who i live with, decided to buy our family home (right to buy) after my dad passed away. now heres the question, years have passed and we now own the home, i put down 60% and mum put down 40% on the house which was worth around 100k. on the deeds the home is in both our names.

now if my mum passed away, could i get screwed out my house by the inheritance tax if my mum left it to me in her will in terms of tax liabilites etc. and likewise if i passed away, would my mum get pushed out?

i heard of some horror stories of peeps that can't afford to pay their inheritance tax liabilities and are forced to sell to pay them off.

if this is the case, what can one do?

thanks for your advice,

chazza

irnbru_2

chazza wrote:

my mum, who i live with, decided to buy our family home (right to buy) after my dad passed away. now heres the question, years have passed and we now own the home, i put down 60% and mum put down 40% on the house which was worth around 100k. on the deads the home is in both our names.

Is the house share your mother's only asset?

Is the house worth more than £712500?

£712500 * 40% = £285K

Only on the amount above £285K will her estate have to pay tax.

Who pays Inheritance Tax?

chazza

mums got some savings but not alot, house is def under that amount, i think its worth around 180-200k mark now. therefore i can i assume as the deeds are in both our names mum owns 50%, which means 100k which is well under 285k, so her estate or even my estate is tax free?

Bossyboots

Do you hold the property as tenants in common or joint tenants? From what you have said you do not need to worry about inheritance tax.

irnbru I don't understand your post. Inheritance tax is 40% on anything over £285k. I am not sure what calculation you have actually done there.

irnbru_2

Bossyboots wrote:

I don't understand your post. Inheritance tax is 40% on anything over £285k. I am not sure what calculation you have actually done there.

The mother's share of the house would have to realise a value greater than £285K to be caught by the threshold. To achieve that, the house would have to be worth more than £712.5K.

chazza

Bossyboots wrote:

Do you hold the property as tenants in common or joint tenants? From what you have said you do not need to worry about inheritance tax.

irnbru I don't understand your post. Inheritance tax is 40% on anything over £285k. I am not sure what calculation you have actually done there.

i am really not sure, i know on the house deeds paper both names show up, what are the implications if any if you hold as tenants in common / or hold as joint tenants boosyboots please?

benood

Hang on Irnbru, Bossyboots is right - the IHT threshold is £285k if the mother's estate is worth less than £285k there's no tax to pay (so don't worry OP you're in the clear at the moment).

However every pound above £285k suffers IHT at 40%.

If only Irnbru was right - happy days.

Robert_Sterling

irnbru wrote:

Is the house share your mother's only asset?

Is the house worth more than £712500?

£712500 * 40% = £285K

Only on the amount above £285K will her estate have to pay tax.

Who pays Inheritance Tax?

I agree with you irnbru.

If the only asset involved is the house and mother own 40% of it then if that 40% is £285,000 or more then IHT would be due.

If 40% of the value of the house is £285,000 then 100% would be £712,500

You are entirely correct.

For any amount by which the value of the house exceeeds £712,500 the IHT will be 16% of that excess.

This is because the mother only gets 40% of the excess and the IHT is 40% of that 40% which is 16%.

Robert_Sterling

chazza wrote:

mums got some savings but not alot, house is def under that amount, i think its worth around 180-200k mark now. therefore i can i assume as the deeds are in both our names mum owns 50%, which means 100k which is well under 285k, so her estate or even my estate is tax free?

It may be assumed that it is 50 50 ownership but as you paid 60% and mother paid 40% you could claim the ownership is 60% yours and 4) mothers I think.

Robert_Sterling

Bossyboots wrote:

Do you hold the property as tenants in common or joint tenants? From what you have said you do not need to worry about inheritance tax.

irnbru I don't understand your post. Inheritance tax is 40% on anything over £285k. I am not sure what calculation you have actually done there.

If they are Joint Tenants which they probably are then there will be no IHT in respect of the house.

I do understand irnbru's post and the figure given by irnbru is correct.

Bossyboots

Robert_Sterling wrote:

If they are Joint Tenants which they probably are then there will be no IHT in respect of the house.

I do understand irnbru's post and the figure given by irnbru is correct.

I get it now too.

Thank you for clarifying for the OP where I was coming from in respect of how the property was held.

chazza - on the deeds it should actually say how the property is held by using the words joint tenants or tenants in common. However, on reading your first post it may be that you have held the property longer than the time in which these phrases have been used. In that case, it will say either joint beneficial owners or something else (which has completely flown out of my mind as I type this). Joint beneficial owners is the same as joint tenants now. This should be in the section called Proprietorship Register.