Best Way to Avoid Inheritance Tax

Scrounger

I don't work to avoid paying tax (and NI).  

Is that tax avoidance?


Scrounger

HUMBUG

debbimse said:

Thank you everyone for your replies, it is much appreciated.

We are thinking about this in a positive way for now that she will own her own home at the time of death, we are a close family and she will be looked after by us in our homes when the time comes, she won't be made to go in to a home for example (she is 90 currently) and would continue living with us and we would care for her / get carers if needed, so we don't feel there is any reason the home would not be hers at the time of death. Of course many things can happen, but we are just looking for some advice on the here and now as she is worried regarding us paying a lot of tax on the house (this is purely just to settle her worries).

She has lived in the home and is still living in it, for 30 years, it was her and her husbands, he died and now the house is fully her own. 

She has no debts and her funeral is already paid for.

She does not have much else in her estate, no large some of money or expensive items, it is purely only the house.

The reason we thought it would be extortionate is because i did not realise there was a tax free amount of £325,000, so learning that info has been really helpful thank you ( we had in our minds we would be paying 40% on the full amount.. )

So say the house did sell for £335,000 for example, both myself and my sister would be full owners of the hours, we would need to pay inheritance tax on the £10,000 only which would be about £4,000 - Would paying capital gains tax be more than this if she was to transfer it in to our name now?

Again this isn't a wish of ours, so no we do not want to get "the old gals money" but she is worrying about things after seeing updates on the news regarding the new government, we are quite clueless, so just want to give her any info we could find.

Thank you.

I am not an expert in IHT so I do not know all the financial intricacies involved (so you might wish to pay for a financial advisor).

When did her husband die and did he leave everything to her ? You need to find out what happened in his WILL and then figure out how much of his IHT may have been transferred to your gran.  If he just left everything to her (and not parts of his estate to others) , then I suspect you will need to check the IHT thresholds in the link below but this goes back to 1986 . 

Note :  I've just assumed the above based on existing IHT rules . But you will need to find out what the IHT rules were at the time of your grandfather's death, how his IHT allowance was used up in his WILL , to then figure out the exact IHT (if any) that was transferred to your gran.

https://www.gov.uk/government/publications/rates-and-allowances-inheritance-tax-thresholds-and-interest-rates/inheritance-tax-thresholds-and-interest-rates

For example , if your grandfather died  '18March 1986 and before 17th March 1987' and left everything to your Gran , then I am assuming there is no IHT for leaving all his estate to his spouse. If my assumption is correct , I am then also assuming  his IHT allowance of £71,000 will then be allowed to transfer to your gran.   There is also something called RNRB (Residence Nil Rate Band) that only applied to married couples (and civil partnerships/other) since 2017.  This extra allowance can be seen in the link above for the years 2017-2020.

So if your grandfather died before 2017  your gran will not get that extra threshold and her total IHT allowance would be £325k (ie. her own individual IHT allowance ) +  'Any IHT allowance transferred to her from your grandfather'. 

Hope this helps but I do advise you to get as much info as you can about your grandfathers WILL , ask HMRC what the rules about IHT were at the time of his death , and then check if any IHT was transferred to your gran.  If it all gets too complicated, then maybe consider spending money on hiring the services of a financial advisor.

Hope this helps.

Albermarle

In these situations, it is usually recommended to see a STEP solicitor, rather than a financial advisor.