Inheritance Tax question

Rony

Hi,

I understand that each parent has a £500,000 threshold before tax applies.

Say if one of my parents die but instead of passing the house to the remaining parent, it goes to me, will the combined £1m threshold still apply? Or only the single £500k?

If the latter is true, then it would be more tax efficient to pass it through to the remaining parent?

Also is there any relevancy in that one of the parents is not on the title deed?

Thanks,

Jeremy535897

Every individual has a nil rate band of £325,000, plus a residential nil rate band of up to £175,000, depending on the value of the property concerned, and how it passes on death.

Where married couples or civil partners are concerned, each can leave an unlimited amount to the other without inheritance tax being payable, and the survivor will acquire the nil rate band of the first to die, to the extent it is not used elsewhere. For further information on the transfer of the RNRB, see:
https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

Rony

Jeremy535897 said:

Every individual has a nil rate band of £325,000, plus a residential nil rate band of up to £175,000, depending on the value of the property concerned, and how it passes on death.

Where married couples or civil partners are concerned, each can leave an unlimited amount to the other without inheritance tax being payable, and the survivor will acquire the nil rate band of the first to die, to the extent it is not used elsewhere. For further information on the transfer of the RNRB, see:
https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

Thanks for your reply.

I understand that married couples can pass unlimited amounts to each other, however my question was specifically if it bypasses one parent. I.e. my Mum passes the house directly to me instead of my Dad. What are the implications then?

Thanks

Jeremy535897

It sounds as if your mother owns the entirety of the house, although simply being the sole title holder does not automatically mean that is the case. I am not sure what the benefit of passing the house directly to you is. If your father continued to live there on his own, there is a risk (depending on the facts) that the gift with reservation rules may apply. The main residence exemption for capital gains tax would be lost, unless you lived there as well, and there can be stamp duty implications, and other possible disadvantages if you have owned no property before.