IHT and the 'extra' exemption of the £175k 'uplift' - question please!

CalJo99

When nice Mr Cameron (I think it was he), added another £175k to our individual IHT exempt allowance of £325k, did it HAVE to be applied only and solely to one's 'family home', or does it apply to the entire estate?

In other words, if my home is only worth, say, £325k anyway, can I still apply that nice £175 'extra exemption' to other assets (including, possibly, a holiday home) to take them out of IHT to that amount??

If not, it seems rather unfair.....

HappyHarry

No, it only applies to the main residence or proceeds of the sale of the main residence. With a main residence valued at £325,000 then you wouldn’t be able to use two full Residence Nil Rate Bands.

CalJo99

that is just SO unfair! It means I can't downsize out of my 'family home', because it is the only IHT-exempt asset I own. I I sell up, then I immediately lose £175k worth exemption!!!!

How can this possibly be 'just'???? It's insane!

CalJo99

PS - and the Government wonders why oldies are hanging on to houses too big for them, and not moving out and freeing them up for new incoming families......

poppystar

CalJo99 said:

that is just SO unfair! It means I can't downsize out of my 'family home', because it is the only IHT-exempt asset I own. I I sell up, then I immediately lose £175k worth exemption!!!!

How can this possibly be 'just'???? It's insane!

Yes, you can downsize and you can even sell up to go into a care home and still use the allowance if you are leaving it to direct descendants.

RAS

As per poppystar, the additional allowance is secure if you downsize or sell up and go into rental or care. As long as you leave enough of your assets to direct descendants.

mark_cycling00

If someone has no property and is not married then I guess it is just £325k tax free.

(Asking for a friend) thx 

RAS

mark_cycling00 said:

If someone has no property and is not married then I guess it is just £325k tax free.

(Asking for a friend) thx 

Depends if the friend has children.

Single, not married and childless, it's only the £325k

theoretica

CalJo99 said:

When nice Mr Cameron (I think it was he), added another £175k to our individual IHT exempt allowance of £325k, did it HAVE to be applied only and solely to one's 'family home', or does it apply to the entire estate?

In other words, if my home is only worth, say, £325k anyway, can I still apply that nice £175 'extra exemption' to other assets (including, possibly, a holiday home) to take them out of IHT to that amount??

If not, it seems rather unfair.....

Think of it the other way round - you apply the 175 first to the home, which gives you more of the 325 available to use on other assets...

If you downsize and your home is now worth less than 175 there are still ways of getting that allowance.

CalJo99

Well this is much better news!!  So I don't have to 'lock away' the £175k uplift in my family (ie, residential) home and if I sell it 'disappears' (I think I misunderstood the first reply, which on reading does say 'or proceeds from sale')

And yes, if I apply the £175k 'bonus' exemption to my residential home (which even after downsizing I doubt would be less than £175k these expensive days), then I'd still have all of my own £325k IHT exempt allowance to offset against whatever else I die owning (including a second home - eg, if I died without savings, but with a second home worth £325k)

Thank you - it just did seem innately unfair to say 'Here's another £175k exemption but you have to own a house worth £550k to get it, and then still pay out 40% on anything over that' rather than just giving you a 'pot' of £550k in the first place.

poppystar

It’s still a tad unfair IMO as I can’t leave my home to a young person like my godson and claim the allowance because I have no children of my own. It becomes a tax on infertility in our pronatalist society. 

The younger people I will leave bequests too will only receive them after 40% tax deducted  so will get considerably less. Unless I give a helping hand to them before my death.