INHERITANCE TAX - SPOUSE DIED 1971

hessie

Any help appreciated - GOV website guidance a little confusing?!
Father died 1971 - mother now died - never remarried, worked hard all her life and paid off her mortgage - her will passes her estate (basically her house, no other assets) to family and charities - but if I understand it correctly the exemptions before IHT may be much less than if her husband had died post-1974?! 
Thanks for any advice.

uknick

I'm not sure if there are any allowances to transfer if first death was prior to IHT being introduced in 1986.  My father died 1967 and when my mother died in 2022, also having never remarried, there were no unused allowances to transfer from his estate.

Bookworm105

are you saying that when father died his entire estate was inherited by your mother?

so you are now asking about
- transfer of unused nil rate band ?
and/or
- transfer of residence nil rate band ?

hessie

hi - yes - seems like my mother's estate will get taxed above £375k plus residence allowance? whereas if father died post 1974 the allowance would be about £1M before IHT kicks in? doesn't seem fair as she worked hard all her life and never claimed anything as a single mum

lincroft1710

hessie said:

hi - yes - seems like my mother's estate will get taxed above £375k plus residence allowance? whereas if father died post 1974 the allowance would be about £1M before IHT kicks in? doesn't seem fair as she worked hard all her life and never claimed anything as a single mum

Your late mother would have benefitted from any allowances due under Estate Duty rules in 1971. 

Albermarle

Inheritance tax in its present form did not exist before 1986. Previously it was a different system, so I guess that is where the problem lies.

lincroft1710

Albermarle said:

Inheritance tax in its present form did not exist before 1986. Previously it was a different system, so I guess that is where the problem lies.

Estate Duty 1894 to 1974/5 then Capital Transfer Tax until 1986

Tyton01

what I have noticed about this Tax is that every year from 1986 to 2009 the threshold was increased each year which meant many people didnt have to pay as much but with property prices going up and no increase as still £325,000  since 2009  and possible now goverment changes in budget  more people could get to pay it. Seems ridiculous why no incresse since 2009 

Albermarle

Tyton01 said:

what I have noticed about this Tax is that every year from 1986 to 2009 the threshold was increased each year which meant many people didnt have to pay as much but with property prices going up and no increase as still £325,000  since 2009  and possible now goverment changes in budget  more people could get to pay it. Seems ridiculous why no incresse since 2009 

The Residence nil rate band was added in 2017 in stages.
So if you pass your home on to your children you have an extra £175K. Then if you are married all your nil rate bands go to your spouse if you die first. So can be One Million Pounds in total. 
Not very fair though on single people with no children.
Any Govt budget changes are very likely to be targeted at loopholes and exemptions that mainly are used by wealthier people.

Keep_pedalling

The issue with deaths prior to 1974 is that there was no spousal exemption at the time, and the estate duty exemption at the time was £12,500 (£10,000 if the death occurred before 21st March). Any percentage of that not used at the time is transferable, so for example his estate was £6,250 and he died in April then 50% of the transferable NRB is available for your mother’s estate. The difficulty here is knowing what his estate was valued at all those years ago.

The transferable RNRB however is available regardless of the date of the death of her husband so if her house if worth  £675,000 or less there will be no IHT liability. If more than that then you are going to have to do some homework on establishing the value of his estate to be able to claim the available TNRB. If at the time it was simply 1/2 value of their home then that should not be too difficult. 

If you do need to claim either RNRB then you are going to have to do a full IHT return. 

uknick

Keep_pedalling said:

The issue with deaths prior to 1974 is that there was no spousal exemption at the time, and the estate duty exemption at the time was £12,500 (£10,000 if the death occurred before 21st March). Any percentage of that not used at the time is transferable, so for example his estate was £6,250 and he died in April then 50% of the transferable NRB is available for your mother’s estate. The difficulty here is knowing what his estate was valued at all those years ago.

The transferable RNRB however is available regardless of the date of the death of her husband so if her house if worth  £675,000 or less there will be no IHT liability. If more than that then you are going to have to do some homework on establishing the value of his estate to be able to claim the available TNRB. If at the time it was simply 1/2 value of their home then that should not be too difficult. 

If you do need to claim either RNRB then you are going to have to do a full IHT return. 

Interesting re the pre 1974 death.  When you say 50% available, due you mean 50% of the current £325k is transferable.  

My father left circa £6k to my mother back in 1967 which, from what you say, should have given her about 50% extra NRB when she passed in 2022 which would have taken her estate out of IHT, even ignoring the RNRB.

When I spoke to HMRC a few years ago about this they said there was no NRB available from his estate as his death predated IHT.   Do you have a link I can use to go back to them?