Inheritance Tax Question

Hoof_Hearted

Married couple -- partner A dies and leaves everything to partner B. No IHT liability.

Partner B dies and leaves everything to children. Is everything over £325K liable for IHT (one nil-rate band) or everything over £650K (two nil rate bands)? I thought it was the former, but something in the paper today made me think it could be the latter.

CTA_2

Hoof_Hearted wrote: »

Married couple -- partner A dies and leaves everything to partner B. No IHT liability.

Partner B dies and leaves everything to children. Is everything over £325K liable for IHT (one nil-rate band) or everything over £650K (two nil rate bands)? I thought it was the former, but something in the paper today made me think it could be the latter.

650k. Essentially the mechanism is that Spouse A unused nil rate band is transferred to Spouse B on death.

Spouse B therefore has their nil rate band PLUS the unused nil rate band of Spouse A.

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

Note, domicile of spouses will affect this (restriction on non-uk dom spouses)

xylophone

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

Hoof_Hearted

Well, I never knew that. Thanks to both of you. Basically, if you own a house in the south-east, you will almost certainly be over £325K, so this is good news.

lilab_2

Hoof_Hearted wrote: »

Married couple -- partner A dies and leaves everything to partner B. No IHT liability.

Partner B dies and leaves everything to children. Is everything over £325K liable for IHT (one nil-rate band) or everything over £650K (two nil rate bands)? I thought it was the former, but something in the paper today made me think it could be the latter.

So long as there was a will from partner A and left everything to spouse, then the IHT threshold can be transferred. You have to complete IHT217 form to transfer the allowance when you complete the probate forms

John_Pierpoint

If partner A died intestate (no will or faulty will), the executor of partner B, then has to demonstrate how the estate was distributed by the intestacy rules and thus what proportion a a nil rate band was left to partner B.

getmore4less

CTA wrote: »

650k. Essentially the mechanism is that Spouse A unused nil rate band is transferred to Spouse B on death.

Spouse B therefore has their nil rate band PLUS the unused nil rate band of Spouse A.

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

Note, domicile of spouses will affect this (restriction on non-uk dom spouses)

This is misleading/wrong.

spouse A nill rate band may have been lower than the current level set april 2009.

The current nill rate band is increased by the same percentage of the unused previous nill rate band NOT plus the unused nill rate band..

CTA_2

getmore4less wrote: »

This is misleading/wrong.

spouse A nill rate band may have been lower than the current level set april 2009.

The current nill rate band is increased by the same percentage of the unused previous nill rate band NOT plus the unused nill rate band..

Yep, valid point there.