House price crash triggers tax windfall on inherited homes

brit1234

House price crash triggers tax windfall on inherited homes

Falling house prices has meant up to £90 million has been overpaid in inheritance tax by families and friends who have been left a home in a will.

Insurance firm NFU Mutual reckons the tax is reclaimable under a special rule called sale of land relief.

The relief lets someone who has inherited a home and then sold the property go back and renegotiate the amount of inheritance tax (IHT) due with HM Revenue & Customs.

To qualify, the claim has to show the property value fell 1% or £5,000, whichever is the lowest, within 48 months of the previous owner’s death.
The latest average house price figures from the Land Registry show prices in England and Wales have dropped 1% in the past 12 months and even more in the previous three years.

Under sale of land relief, IHT is recalculated by switching the current home value for the date of death value.

Assuming an estate worth more than £675,000 included a home sold in April 2008 for £350,000, now valued at around 12% less (£308,000), the estate can claim to recalculate the IHT paid on the current value.
This would save £16,800 IHT on the £42,000 price difference – plus interest on the overpaid sum.

A claim is valid for up to six years after the date of death.
Make the claim by completing and sending a Form IHT38 to the tax office that dealt with the IHT.

A free download is available from HMRC’s website.
NFU Mutual personal finance specialist Sean McCann said: “Many people don’t realise that they can claim back inheritance tax if the property they inherit sells for less than it was valued at during probate.
“With house prices generally falling across over the last four years, thousands of people could still be able to claim back any such overpayment.”

http://www.property118.com/index.php/house-price-crash-triggers-tax-windfall-on-inherited-homes/28840/

chewmylegoff

What is the point of this post?

brit1234

chewmylegoff wrote: »

What is the point of this post?

I don't know, maybe being a money saving forum people can claim back a load of cash due to the property crash perhaps?

FTBFun

brit1234 wrote: »

I don't know, maybe being a money saving forum people can claim back a load of cash due to the property crash perhaps?

But why are you interested? You'll never be buying any property.

PasturesNew

Not many people ever pay IHT do they ...? I know it's not something anybody in my family will ever pay.

chucky

chewmylegoff wrote: »

What is the point of this post?

It's a Brit1234 thread with the usual grinning face emoticon so it's not really news.

It's best to humour her.

brit1234

chucky wrote: »

It's a Brit1234 thread with the usual grinning face emoticon so it's not really news.

It's best to humour her.

Humour her??? Why are you treating me as a Bangkok chick boy. If you want to call me a bloke a lady I suggest you keep your fetish to yourself.

chucky

brit1234 wrote: »

Humour her??? Why are you treating me as a Bangkok chick boy. If you want to call me a bloke a lady I suggest you keep your fetish to yourself.

You've lost me Brit.

But for you to have thought of what to write in that post you must have visualised it. In your case going by your posts, probably quite graphically with a few images thrown in too.

DpchMd

If we keep saying that house prices are crashing does it make it true?

brit1234

DpchMd wrote: »

If we keep saying that house prices are crashing does it make it true?

Not even London property prices are safe as houses now...

Every forecaster, from Nobel prize-winning economist to sloppy-drunk man in the Dog and Duck, who ever said London house prices are an absurd bubble which must go pop has ended up looking ridiculous.

And probably impoverished, assuming they had the courage of their idiotic convictions and kept renting.

There’s a special place in the Idiot Investment Museum for these guys (it’s just off London Bridge, near the old Merrill Lynch office, coincidentally). People turn up to throw mouldy cabbages at them for 10p a time, which is now their only income. Their families live in shame (but not in a house they own). Sympathisers who might have agreed that their basic theses had merit fall back on the old saw that markets can stay irrational longer than anyone can stay solvent, that momentum is powerful.

Sometimes you have to go with the mo, rather than with a rational analysis of value, especially when it comes to housing in London.
Houses are different from other investments because even if the one you bought is falling in value, you still get to live in it. Share certificates won’t keep anyone warm for long.

And London is its own special case. There’s not enough housing supply in the first place, and the good reasons to live in the capital keep outweighing the high cost of housing, so demand just keeps rising. As Mark Twain said: “Buy land. They’re not making it any more.”
Anyway, here goes:
London house prices are an absurd bubble that must go pop. I don’t mean a vague wobble here, a one-month 0.3% slide. I mean a crash.
For at least the past 10 years, house prices in the capital have been sharply driven by City bonuses, which had a ratcheting effect all the way down, even for homes in which no banker would be seen dead.
There just aren’t many bonuses now. Indeed, business in the Square Mile is so slack there will probably be another cull of expensive brokers and traders. It’s not just the juniors who will be axed.
City firms aren’t really hiring graduates, so there are fewer ambitious types at the bottom of the ladder willing to stretch themselves for a starter flat in contemptible Clapham.

Many London homeowners live precariously, assuming their house-price equity will always be there as a cushion. Not much more has to go wrong for their finances to be unsustainable.

Bruce Packard at Seymour Pierce points out that the ratio of household debt to disposable income is now 150% — higher than it was in America when the bubble there reached breaking point. And that in previous banking crises, real house prices have tended to decline for up to three years after the trough in GDP.

One reason house prices aren’t falling now is that there are few forced sellers, what with interest rates being so low and with banks trying to take a kind view on arrears just now.

What happens if interest rates rise or banks get tough?

There’s no doubt that panic from Greece and elsewhere is already making mortgages hard to come by, and more expensive by the month, which hits affordability, and in turn house prices. Surely.

So how about the following scenario: There’s a post-Jubilee, post-Olympics lull to London as the realisation that a few gold medals and some terrible traffic jams didn’t actually make us rich (who knew?).
Spain really does go to the wall, then nowhere looks like a safe haven, not even London property.

Then a new form of swine flu emerges. It seems genuinely out of control this time. People panic and flee to the countryside.

When Hong Kong (an overcrowded place with high property prices) was hit by Sars in 2003, house prices just kept on tumbling.

It could happen here. But remember, any forecaster who has ever said…

http://www.thisislondon.co.uk/business/markets/not-even-london-property-prices-are-safe-as-houses-now-7800503.html

DpchMd

How does that answer my question?