PA1P / IHT 205 / IHT 400...

ferger

Long time since I posted in here - back when my father died in 2015...

His estate was pretty complex and had inheritance tax due, so I had to wrestle with all the forms at the time. My partner's father died in January and I am supporting her in obtaining probate - she is joint executor in his will.

The rules have changed... I am struggling to get a clear answer to what is a relatively simple question...

His estate has perhaps £100k of cash / investment assets plus his half of a property owned with his (surviving) wife as tenants-in-common, worth approx £500k in total (£250k each). She is in a home with dementia, with children (incl my partner) having PoA. His will leaves everything to his (5) children in equal parts.

So... total value of his estate is a bit above IHT threshold of £325k, but clearly no IHT to pay after application of the nil rate band (and around £150k) of his IHT threshold to transfer to his wife, unlikely though she is to need it ultimately).  What I am struggling with is which forms need to be complete: Do we need to complete IHT400 because the estate is over the basic IHT threshold, and claim the nil rate band through that process - or can we just do IHT205? I have this sneaking feeling that we may have to go the detailed route of IHT400 in order to correctly calculate the specific value of the transfer of his IHT allowance to his wife, but I can't find anything that specifically says so. 

Thanks for any help!

buddy9

IHT205 is no longer in use for deaths occuring from 1 January 2022. I think you need to use IHT400 because the estate is not an excepted estate.

SeniorSam

I believe you will find that IHT400 is not needed unless the estate is above the nil rate band and residential allowances inheritance tax is payable.

Where there is a Will, the original Will and Death certificate can be posted and online you can forward the  PA1P Probate application form,

buddy9

SeniorSam said:

I believe you will find that IHT400 is not needed unless the estate is above the nil rate band and residential allowances inheritance tax is payable

Perhaps Sam could identify the guidance that allows this to be considered an excepted estate.

SeniorSam

As no inheritance tax is payable in this case and the death was after 1st January 2022,, then IHT400 is not due and therefore it is an excepted estate.
https://www.incegd.com/en/news-insights/private-client-tax-changes-probate-application-process-and-submission-inheritance-tax

getmore4less

a couple of useful links

https://www.gov.uk/valuing-estate-of-someone-who-died/excepted-estates-1-january-2022
https://www.gov.uk/valuing-estate-of-someone-who-died/estimate-estate-value

have to ask every time 

His will leaves everything to his (5) children in equal parts.

Any life interest for the wife?
If there is then the house becomes exempt (for IHT purposes passes to the wife with an y residual nil rate bands).

buddy9

The definition of excepted estate in the link is incorrect.

'Excepted' means that no account needs to be submitted, it doesn't align with IHT liability.

One consequence is that IHT 400 can be required for some estates where there is no IHT to pay.

-----------------------------------------------------------------------------------------------
Inheritance Tax Act 1984

section 216 Delivery of accounts.

Except as otherwise provided by this section or by regulations under section 256 below, the personal representatives of a deceased person and every person who……………………

…………………………shall deliver to the Board an account specifying to the best of his knowledge and belief all appropriate property and the value of that property

ferger

getmore4less said:

a couple of useful links

https://www.gov.uk/valuing-estate-of-someone-who-died/excepted-estates-1-january-2022
https://www.gov.uk/valuing-estate-of-someone-who-died/estimate-estate-value

have to ask every time 

His will leaves everything to his (5) children in equal parts.

Any life interest for the wife?
If there is then the house becomes exempt (for IHT purposes passes to the wife with an y residual nil rate bands).

There is no life interest. She has not lived there for years and the house is owned as tenants in common. 

ferger

Some conflicting advice in these comments... 

If 205 is no longer used, what replaces it? Can't be 400, for even simple estates surely. 

It appears to rest on whether the estate is excepted - which my reading suggests means only that is of lesser value than the basic IHT allowance, not the allowance + nil rate band, even if ultimately that means no tax is payable. Implicitly this would mean 400 is necessary to declare the absolute value of the estate so that residual allowance can pass to his wife accurately (not that she'll need it).  Can someone who knows confirm, or tell me otherwise?

Fijay

 Had this recently for a death in September - similar circumstances and similar sums had to do the 400, and what a pain that was. You haven't mentioned Residence nil rate band which can be applied to the deceased's share of the house as it's going to direct descendents.  I was surprised to see the RNBR came off the calculation before the usual nil rate band - the forms take  you through the calculations.   Reading the post January rules per  page two of IHT 400 notes, I think you do need to complete the IHT 400 because the assets are not passing either to civil partner/surviving spouse, or a charity.  Downloadable copy of the notes is here:  https://www.gov.uk/government/publications/inheritance-tax-inheritance-tax-account-iht400    

SeniorSam

If the person died on or after 1 January 2022

An estate is usually an excepted estate if any of the following apply:

• its value is below the current Inheritance Tax threshold