Inheritance Tax

aspirations

House prices rise and the inheritance tax threshold remains frozen, so, in the fullness of time, even with a modest property value, more people could get caught up in this tax.
Apparently, you can leave your property to your children to avoid this tax, but what does that mean?  Thanks.   

Keep_pedalling

It may or may not avoid IHT depends on the value of the property but it can certainly reduce IHT. What you are referring to is the residential NRB which is £175k exemption which allows you to leave £500k tax free to if you are a married couple £1M. 

aspirations

Thanks for your reply.
As I understand it, the NRB is used when you 'leave' your property to your children.  But what does that mean, does leave mean they can sell it or do they have to live in it?

Keep_pedalling

You don’t actually have to name the property in you will, if you have left the bulk of your estate to your children then your executors can claim the allowance. It is even possible these you may not own a house at the time of your death but it can still be claimed under the downsizing rules.

Albermarle

aspirations said:

Thanks for your reply.
As I understand it, the NRB is used when you 'leave' your property to your children.  But what does that mean, does leave mean they can sell it or do they have to live in it?

Once the estate is paid out to the beneficiaries, they can do whatever they like with it, whether it is a house, cash, investments, a stamp collection or a Ferrari.

Notepad_Phil

aspirations said:

Thanks for your reply.
As I understand it, the NRB is used when you 'leave' your property to your children.  But what does that mean, does leave mean they can sell it or do they have to live in it?

No they do not have to "live in it", but they can do so if they wish to, or they could sell it or rent it out or anything else they want to do with it - it will be completely up to the children to decide.

uknick

The current average house price in the UK, November 2024, is about £300k.  With a single person getting a total IHT allowance of £500k that still leaves about £200k in other assets before IHT becomes an issue.

Therefore, the house value is not really going to be a problem for 95% of the population for some years.  But, their pension fund might.