Inheritance tax - should we buy a bigger / more expensive house?

Marine_life

Two questions:

1. Our current home is worth around 500,000 - if I understand the rules correctly, for IHT purposes we would be better off owning a home that is worth somewhere north of that - correct?

2. I understand the higher main residence allowance tapers if assets are greater than 2 million. Does that mean just property assets or total assets?

kidmugsy

1. First I've heard of it; please explain.

2. The lot.

xylophone

https://www.taxation.co.uk/Articles/2017/10/10/337068/residence-nil-rate-band

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

Keep_pedalling

Your home is currently worth far more than you combined primary residence nil rate bands, so buying a more expensive me is not going to help as far as inheritance planning is concerned. Assuming you have children you would be far better off thinking about gifting to them to make use of the 7 year rule, especially if your estate is well over a £1M.

Marine_life

xylophone wrote: »

https://www.taxation.co.uk/Articles/2017/10/10/337068/residence-nil-rate-band

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

So probably the impact is that you have a total of 350k to offset against a house and 650 to offset against the house OR other assets (those values are for a couple). So actually ....no incentive to own a larger house.

SeniorSam

Purchasing a larger home has no bearing whatsoever in inheritance taxes. This tax is determined by the overall wealth if the first to die of a married couple passed their estate to the spouse. It is simple a matter of total assets unless you take action to mitigate the tax at sufficient a time before you die.

Sam