Inheritance Tax advice

izaac

My father died in 2006 and left everything to mum, so no IHT was payable though the joint estate would have been enough to warrant it (i.e was greater than the 2006 threshold of £285k)

Mum has just died and I've been told that the IHT threshold is today's (£325k) plus dad's combined, so £610k.

IS this true??

getmore4less

No.

If no assets went elsewhere then there is 100% unused allowance.

That doubles the current allowance.

https://www.gov.uk/inheritance-tax/leaving-assets-spouse-civil-partner

izaac

OK, many thanks!

purdyoaten

Mattygroves2 wrote: »

So in this case if the first death was between 6 April 2006 and 5 April 2007 the carry forward would only be £285,000.

So your mum has got a tax free allowance of £325 + £285k = £610k. Assuming no assets went elsewhere and he didn't have any gifts within the last 7 years of his life that counted for IHT purposes.

Are you sure about this? I believe that the IHT threshold that will apply is the one effective at the time of the second death. For example, 0% used of iht threshold at first death means 100% of iht threshold available for transfer at second death. The transfer is based on the percentage unused at first death and applied to the new threshold at second death - kind of the opposite to what you are saying?

In this instance it will be 100% of £325k which means that mum has an iht limit of 650k.

Am I doting?

getmore4less

Mattygroves2 wrote: »

The allowance that is carried forward is based on the nil rate allowance at the time of the first death. See questions 9 to 11 on IHT form 402 which is where you actually claim it.

So in this case if the first death was between 6 April 2006 and 5 April 2007 the carry forward would only be £285,000.

So your mum has got a tax free allowance of £325 + £285k = £610k. Assuming no assets went elsewhere and he didn't have any gifts within the last 7 years of his life that counted for IHT purposes.

Ignore the above that is NOT how it works.

it is an uplift of the current allowance based on the % of unused allowance.

purdyoaten

getmore4less wrote: »

Ignore the above that is NOT how it works.

it is an uplift of the current allowance based on the % of unused allowance.

Check - I am not doting!

getmore4less

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373532/IHT402.pdf

the real calculations are in 17-20

izaac

TBH I don't know what the estate would've been valued at in 2006 which is when dad died- pre house price -ahem- 'crash' it was possibly worth quite a lot, I'd say definitely more than £285k, especially also including his pension lump sum. I believe the house is now worth about £400k, and the rest of the estate, probably £50k.

The last linked form says to use it if the first death was after 2007, I see. Which it wasn't.

Mattygroves2

getmore4less wrote: »

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373532/IHT402.pdf

the real calculations are in 17-20

Agreed I'll delete my original post so as not to confuse.

Seems very generous of HMRC but as usual not easy to calculate via the IHT forms.

purdyoaten

izaac wrote: »

.

The last linked form says to use it if the first death was after 2007, I see. Which it wasn't.

I think that you have misread it. The form refers to the 'deceased' and a transfer of unused allowance from a spouse who, obviously, would have died first.

The form can only come into play on the second death.

Also the house value at first death would be irrelevant if passed to your mum. To quote from the form:

Do not include legacies and assets that passed to the deceased who has died now

Please take advice on this!

xylophone

http://www.bennettwelch.com/inheritance-tax-faqs

How does it work?

What is transferred is the unused percentage of the first to die's nil rate band.

Example 1

Mr Adam dies on the 1 July 2001 and leaves everything to his wife, Mrs. Adam. At the time of his death the nil rate band was £242,000.

Mrs Adam dies on the 1st April 2010 at the date of her death the nil rate band was £325,000.

As Mr Adam used none of his nil rate band then 100% is transferable but at the level at the time of Mrs Adam's death so her estate will receive a nil rate band of £650,000.