Inheritance Tax Proportions

Maggi35

I know there is the £325k nil rate allowance for IHT for cash/savings etc and then on top of that a £175k allowance for property which then equates to £500k total. My question, which I can't seem to find the answer to on gov.uk, is if someone has cash/savings of £400k and property worth only £100k (equating to the £500k) is that still allowed within the allowance? So can the savings element make up more of the overall allowance and property make up less or are they treated independently from each other? In this instance they would be using some of the property allowance for the cash element and I don't know if that is allowed. Any advice would be great, thank you

JGB1955

AIUI the allowance is £325K + 1/2 of the value of the house. If the house is worth £350K the total is £325K + £175K.  If the house is valued at £100K, the allowance is £325K + £50K.

In your scenario you would only be able to claim £375K.

Keep_pedalling

JGB1955 said:

AIUI the allowance is £325K + 1/2 of the value of the house. If the house is worth £350K the total is £325K + £175K.  If the house is valued at £100K, the allowance is £325K + £50K.

In your scenario you would only be able to claim £375K.

Why are you only allowing half the value of the house for the RNRB, the whole £100k will be claimable if at least £100k i# being left to a direct descendant. 

JGB1955

Keep_pedalling said:

JGB1955 said:

AIUI the allowance is £325K + 1/2 of the value of the house. If the house is worth £350K the total is £325K + £175K.  If the house is valued at £100K, the allowance is £325K + £50K.

In your scenario you would only be able to claim £375K.

Why are you only allowing half the value of the house for the RNRB, the whole £100k will be claimable if at least £100k i# being left to a direct descendant. 

You're right... of course!  Apologies.  so.... £425K?

Maggi35

Thanks but I'm presuming from your responses that there is no way for someone to disproportionally leave more than the £325k allowance in savings and less money in property and still be under the total threshold of £500k?  So if someone is cash rich (e.g. £400k) but the property value is way lower than the £175k allowance (e.g. £100k) then they would still have to pay IHT on the £75K which is over the the £325K cash/savings allowance?

Keep_pedalling

Maggi35 said:

Thanks but I'm presuming from your responses that there is no way for someone to disproportionally leave more than the £325k allowance in savings and less money in property and still be under the total threshold of £500k?  So if someone is cash rich (e.g. £400k) but the property value is way lower than the £175k allowance (e.g. £100k) then they would still have to pay IHT on the £75K which is over the the £325K cash/savings allowance?

There is an exception which would probably apply to many estates that are in this position and that is the downsizing rule where the value of a larger house they previously lived in can be used.

https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold#downsizing-before-6-april-2017

Maggi35

great, I'll check the link out