Additional Inheritance Tax Threshold Applicable?

Montypip

Dear All,


I have been a long term lurker on this forum and a big fan of all the advice given, but this is the first time I have ever posted.


I am really hoping that someone can help me by answering my question, as I am driving myself mad by random, late night googling on the subject.


Sadly, my Mother died in July this year. She owned a property worth approximately £550,000 and she left it equally between her boyfriend, my brother and myself (her daughter).


We understand that we have to pay Inheritance Tax on her Estate.


I have visited the HMRC Inheritance Tax Calculator and inputted the details. It has said that we do qualify and can increase the threshold by an extra £125,000.


I have also phoned the HMRC helpline, to double check, and the lady who answered my call said 'no' as only 66% of the estate was going to direct descendants we could not have the additional threshold.


The Company handling Probate will not give me a straight answer and want to charge us a fee for preparing a Deed of Variation.


Does anyone out there know the answer?


I would be very grateful for any replies received.


Thank you for reading x

Yorkshireman99

Montypip wrote: »

Dear All,


I have been a long term lurker on this forum and a big fan of all the advice given, but this is the first time I have ever posted.


I am really hoping that someone can help me by answering my question, as I am driving myself mad by random, late night googling on the subject.


Sadly, my Mother died in July this year. She owned a property worth approximately £550,000 and she left it equally between her boyfriend, my brother and myself (her daughter).


We understand that we have to pay Inheritance Tax on her Estate.


I have visited the HMRC Inheritance Tax Calculator and inputted the details. It has said that we do qualify and can increase the threshold by an extra £125,000.


I have also phoned the HMRC helpline, to double check, and the lady who answered my call said 'no' as only 66% of the estate was going to direct descendants we could not have the additional threshold.


The Company handling Probate will not give me a straight answer and want to charge us a fee for preparing a Deed of Variation.


Does anyone out there know the answer?


I would be very grateful for any replies received.


Thank you for reading x

Considering the amount involved paying £100 or so for a DOV is trivial. There is no reason a professional should do work for nothing.

wizzywilc

If a property is left partly to direct descendants and partly to someone else a proportion of the "additional residence nil rate band" can be applied. There is an example of how this works on the gov.uk website. So if the property is left in equal shares to 3 people, of whom only two are direct descendants 2/3 of the nil rate band can be applied.

I'm not sure why a Deed of Variation has been suggested, unless the boyfriend has agreed to give up his inheritance so all the house goes to direct descendants, possibly with an adjustment made elsewhere in the will.

wizzywilc

I don't know where you would find a solicitor to draw up a DoV for £100. I had a quote of £350-600 + VAT for a fairly simple one, and that was with pretty clear written briefing. In the end I paid over £600 for the DoV and the solicitor checking all my IHT forms before I submitted them. Which process saved a lot of IHT, so a good investment.
Both HMRC written guidance, and the person I spoke to on their helpline stressed that you can do a DoV yourself in the form of a letter. But as I was an executor and not a beneficiary I didn't want to take any risks.

Yorkshireman99

wizzywilc wrote: »

I don't know where you would find a solicitor to draw up a DoV for £100. I had a quote of £350-600 + VAT for a fairly simple one, and that was with pretty clear written briefing. In the end I paid over £600 for the DoV and the solicitor checking all my IHT forms before I submitted them. Which process saved a lot of IHT, so a good investment.
Both HMRC written guidance, and the person I spoke to on their helpline stressed that you can do a DoV yourself in the form of a letter. But as I was an executor and not a beneficiary I didn't want to take any risks.

That much is a rip off particularly if the solicitor is making the probate application as well. In any case it is not the executor’s job to do the DOV. The beneficiaries need to do it. As always the beneficiaries should shop around for quotes.

Mojisola

Montypip wrote: »

The Company handling Probate will not give me a straight answer and want to charge us a fee for preparing a Deed of Variation.

What's the reason for doing a DOV?

Tom99

Assuming mother had lived in the property:

'The amount of the additional threshold due for an estate will be the lower of:

• the value of the home, or share that direct descendants inherit
• the maximum additional threshold available for the estate when the person died'

So £550k x 66.7% but max £125k = £125k

Refer the probate co to both the .gov guidelines and calculator and to forget about DOV which would involve boyfriend giving up a £183k inheritance and is not needed.

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band
https://www.tax.service.gov.uk/calculate-additional-inheritance-tax-threshold/no-additional-threshold-available

Keep_pedalling

Was your mother a widow? If so did her husband leave everything to her?

Montypip

Dear All,


Many thanks for your replies - they have been most helpful.


Yorkshireman - I should have said the company dealing with Probate wanted to charge a large fee of £800 + Vat. I am very happy to pay for professional advice but was getting conflicting message if a DOV was infact required as the reason for doing a DOV was to cut the Inheritance Tax bill.


Tom99 - Many, many thanks, I had previously looked at the HMRC website but I think their terminology confuses me. The example sum you gave helped enormously and I think I finally understand.


Keep Pedalling - My mum was not a widow, she divorced my Father forty years ago and this house has always been solely her house.


Very grateful for all your responses - I just wish I had posted sooner.

Yorkshireman99

Montypip wrote: »

Dear All,


Many thanks for your replies - they have been most helpful.


Yorkshireman - I should have said the company dealing with Probate wanted to charge a large fee of £800 + Vat. I am very happy to pay for professional advice but was getting conflicting message if a DOV was infact required as the reason for doing a DOV was to cut the Inheritance Tax bill.


Tom99 - Many, many thanks, I had previously looked at the HMRC website but I think their terminology confuses me. The example sum you gave helped enormously and I think I finally understand.


Keep Pedalling - My mum was not a widow, she divorced my Father forty years ago and this house has always been solely her house.


Very grateful for all your responses - I just wish I had posted sooner.

Your thanks appreciated by me and I am sure by others. A DOV should fit on an take no more than half an hour to prepare. Never be afraid to ask. I have usually found that in any field are keen to share knowledge as most on this board are. Hope you get it all sorted.