RNRB downsizing - do I qualify?

bumpergirl

Still sorting through my probate requirements and can't find the answer to one question ;
property sold for £312000  in 2018- no new property bought. I have £200000 left to leave to children, so less than the property value. So can I[my executors] claim any of the downsizing addition  - would be roughly two thirds of the allowance £125000. this matters because i have given gifts up to my NRB.
thanks

Marcon

bumpergirl said:

Still sorting through my probate requirements and can't find the answer to one question ;
property sold for £312000  in 2018- no new property bought. I have £200000 left to leave to children, so less than the property value. So can I[my executors] claim any of the downsizing addition  - would be roughly two thirds of the allowance £125000. this matters because i have given gifts up to my NRB.
thanks

Have you tried https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold which seems to walk you through all the steps you need to get answers to your questions.

bumpergirl

thank you Marcon - yes i have read but it doesn't seem to quite apply as I cannot leave the equivalent value of my share in house.
" Other assets passing to direct descendants If there are no assets passing to direct descendants, other than the property mentioned at question 5 there won’t be any downsizing allowance. "

Shedman

As I read it from the downsizing guide and using your figures with no house in the estate at date of death then going through the steps 1-5 and using the first example (the Widow example) but assuming you have with no transferable RNRB it looks like: 

Step 1 Max RNRB in 2018/19 when house was sold was £125,000
Step 2 House sold £312,000 so 312/125 > 100% so limited to 100% 
Step 3 No house in estate at death so 0% 
Step 4 Step2 minus Step3 gives 100% minus 0% = 100%
Step 5 Assuming death this year with maximum RNRB of £175,000, then the 'lost' RNRB would be 100% x £175,000 = £175,000 so that would be your max downsizing addition 

As currently you have £200,000 to leave and its all going to your direct descendants then the full £175,000 RNRB could be offset against it leaving only £25,000 subject to IHT (as you've used up your NRB with gifts)

So long as your assets at death are being passed to direct descendants then the downsizing addition would apply up to the full £175,000 if at least that much was passed on.  But if, as an example, you only left 75% (£150,000) to your children and the remaining 25% (£50,000) to non-directs (eg siblings, cousins, nephews/nieces, friends) then only 75% of the downsizing addition (£131,250) could be offset.  

bumpergirl

Many thanks, Shedman - that is so clear. you should work for the tax office!