Inheritance tax

adonis10

Just been reading briefly on IHT and noticed a new rule whereby if a home is passed on to children then the threshold goes up to £425k. When did this rule come in? Also, does the higher threshold apply to total estate or just the home, for example if a widow passes on their house to a child and passes away 7 years later, is the tax free allowance of 425k on the whole estate, i.e. passed on a house worth £325k and cash £100k then no IHT would be due, or does the thershsold only apply to property value?

Brighty

It came in last month, the extra allowance is £100k this tax year, rising £25 a year upto £175k over the next few years.
The extra only applies to a property, so you could leave £325 in cash plus a £100k property or just a £425k property, it doesn't count if you just left cash of £425k
Also, if the widow's husband left all his estate to his wife, then the widow may also be able to use his unused £325k allowance + £100k property band, so total of £850k with no IHT this year, rising to £1mil by 2020

If a widow gave her property to a child (why? usually a bad idea), if she died within 7yrs, it would form part of her estate for the IHT calculation, but after 7 yrs it would not

xylophone

https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band


http://www.skerritts.co.uk/pages/10+things+advisers+need+to+know+about+the+residence+nil+rate+band

Keep_pedalling

A widow's estate would also have access to any unused portion of their husbands nil rate band, and his unused primary residence nil rate band, even if he died years ago. This brings the total up to £750k providing the house was valued at more than £200k. This is due to rise to £1M over the next few years.

Your example is complicated be the foolishness of giving the house away, which AFAIK means that the primary residence nil rate band is lost. Even worse if she continued to live in it after giving it away it still forms part of her taxable estate, although that is only an issue if that takes the estate into IHT territory.

The primary residence nil rate band can still be claimed if age ment you needed to downsize or move into sheltered housing or residencial care.

Brighty

Keep_pedalling wrote: »

This brings the total up to £750k providing the house was valued at more than £200k. This is due to rise to £1M over the next few years.

Is that a typo? It's £850 is it not, 2 x £325 + 2x £100

Keep_pedalling

Brighty wrote: »

Is that a typo? It's £850 is it not, 2 x £325 + 2x £100

Yes, it was a typo.

Arthurian

Even if they lived in the same house? They still get £100k each, not £100K per house?

xylophone

They still get £100k each

https://www.pressreader.com/uk/shares/20170323/281878708198750