How to value the Estate

Brighty

Yorkshireman99 wrote: »

Thanks. I got to totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA

£24k I assume. I'm no expert, just going by what it says in that link, it's pretty clear. What were you told different and justification or reasoning did they give?

Keep_pedalling

Taper relief only applys if the deceased has gifted over his/her £320k nil rate band in the previous 7 years and it only applies to the portion of the over the limit. So for instance if you gave £400k away4 to 5 years before death IHT would apply fully to £320k and tax on the remaining £80k is reduced by 24%

Keep_pedalling

Brighty wrote: »

If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

There is taper relief on the 7yr rule regarding gifts
https://www.gov.uk/inheritance-tax/gifts

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.

Yorkshireman99 wrote: »

Thanks. I got to totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA

As the gift is under the nil rate band, the full 40% woould be due, so £40k

Yorkshireman99

Keep_pedalling wrote: »

As the gift is under the nil rate band, the full 40% woould be due, so £40k

Thanks. So if you gift less than the nil rate band the whole gift is subject to IHT at 40% until 7 years have elapsed. In other words there is no taper relief in these circumstances. Or have I still misunderstood it! My brain is hurting at this late in a long day.

Keep_pedalling

Yorkshireman99 wrote: »

Thanks. So if you gift less than the nil rate band the whole gift is subject to IHT at 40% until 7 years have elapsed. In other words there is no taper relief in these circumstances. Or have I still misunderstood it! My brain is hurting at this late in a long day.

That is correct, although that vital piece of info is not pointed out on the government's own website which helps create this confusion.

https://www.gov.uk/inheritance-tax/gifts

This site explains it better.

http://penguintaxplanning.co.uk/misconception-around-gifts-taper-relief/

Yorkshireman99

Keep_pedalling wrote: »

That is correct, although that vital piece of info is not pointed out on the government's own website which helps create this confusion.

https://www.gov.uk/inheritance-tax/gifts

This site explains it better.

http://penguintaxplanning.co.uk/misconception-around-gifts-taper-relief/

Thank you.This explains my confusion as the HMR&C site was one that I compared with another. I am reminded of someone I once knew who sometimes said "I see it all, not quite" when he did not get the point! I shall reflect on the points after some sleep!

getmore4less

Back to basics. picking up a few points along the way

When mother died everything went to dad and we did not have to do anything with probate. She died almost two years ago.

when mum died was there a will.
if not what was the value of her estate.
how did they own the house what was its value

how close to the 2 years are you?
(there may still be a window for a DOV if it would help(unlikely).

Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time

Not true even TIC can be done without a grant from the first death.

So am I right in thinking there will be some taper relief for a gift? Are we able to use mum's portion of IH tax allowance?

Difficult to tell as important information is missing.
Start with gifts with reservation, if that applied then there are no failed PETS anyway.

So did any parent stay in the house after gift and did any of the kids live there.

The gifts use up the nil rate band first so if below £325k no taper relief, if gifted by dad and mums estate transferred to dad then that's £650k and possibly upto £850k before any taper relief on the gifts.

Thanks. I got two totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA

In that example the gift uses up £100k of the nil rate band so NO IHT on the gift just less (£225k) nil rate band for the rest of the estate, that now has £100k liable to IHT.

................................................
Need a proper time line and some real numbers to have any chance of giving any guidance on what to look out for.

Yorkshireman99

Yorkshireman99 wrote: »

Thank you.This explains my confusion as the HMR&C site was one that I compared with another. I am reminded of someone I once knew who sometimes said "I see it all, not quite" when he did not get the point! I shall reflect on the points after some sleep!

The other confusion the concept that the gift gets some relief but this is then deducted from the nil rate band. What matters is the total IHT take on the whole estate. Apportioning it between parts of the estate is irrelevant. Only HMR&C's lawyers and the Chaacller could have dreamed up such a scheme!

getmore4less

Yorkshireman99 wrote: »

The other confusion the concept that the gift gets some relief but this is then deducted from the nil rate band.

that's is not how it works, the gifts get the nil rate band first, then if over that then there is potentially some taper relief on the tax due on the bit over taper relief does not reduce the gift just the tax

What matters is the total IHT take on the whole estate. Apportioning it between parts of the estate is irrelevant. Only HMR&C's lawyers and the Chaacller could have dreamed up such a scheme!

If the gifts are over the nil rate band then the gifts get taxed and the liability for that tax fall on recipient the gifts.

The estate then gets taxed and the estate pays.


there are additional complications for chargeable lifetime transfers as they pay IHT up front and that get included in the calculations.

Yorkshireman99

Thank you! I have had a look at a number of sites and again the answers are conflicting. Apologies to the OP for interrupting their thread. I suppose it illustrates the fairly blunt way IHT applies with rather than it being progressive particularly those with no children. Ce la vie!