Inheritance Tax

Cluffbert

Hello,

Just  seeking clarification Please.

I am an only child. My Mum sadly passed 2 weeks ago.She made a will leaving her house and the rest of her estate soley to My Wife and myself. Her entire estate would be under 500k including her home when sold. I have seen the  2 figures £325k and  £500k quoted. What liability if  any do We face for IHT please ?

Grumpy_chap

Everyone has £325k IHT allowance.
That increases to £500k if passing the family home to children.
If your mother was previously married and your father left everything to her, then those allowances double.
If there have been substantial gifts from the estate, that can reduce the remaining allowances (or can increase the value of the estate if the gifts are deemed still within the estate).
It would appear as though the OP's mother will have no IHT liability.

One caution I would make, and hopefully others can confirm, is whether the 50% of the house passed to the OP's wife rather than the OP impacts the family home part of the OHT threshold.  The OP's wife was not, obviously, the child of the OP's mother.

Keep_pedalling

There will be no inheritance tax, but if she was a widow the best option is to claim her NRB plus any unused transferable NRB from her husband’s estate. This will mean you don’t need to complete a full IHT return. If she wasn’t a widow or her husband’s NRB was used up you can claim her residential NRB, but that does require a full IHT return.

Newbie_John

https://www.gov.uk/inheritance-tax

Quite clear here about £325k and £500k 

FrugaiMacDugal

You and your wife will have no IHT liability, if there is IHT due it will be paid from the estate.

Cluffbert

Many Thanks All,   I wondered  if  anyone  can please clear up  the  point  raised  earlier. The  house sale  would  be  split  between my  wife and myself  equally albeit it is  unlikely  to be  worth more  than 70k. As  my  wife  is  not  a direct descendant would She incur any liability or be covered under the umbrella that half of the property is left by a widow  to her son ?

Cairnpapple

A spouse of a child counts as a direct descendant for the purposes of the RNRB. https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

Keep_pedalling

Cluffbert said:

Many Thanks All,   I wondered  if  anyone  can please clear up  the  point  raised  earlier. The  house sale  would  be  split  between my  wife and myself  equally albeit it is  unlikely  to be  worth more  than 70k. As  my  wife  is  not  a direct descendant would She incur any liability or be covered under the umbrella that half of the property is left by a widow  to her son ?

It is  the estate that incurs and tax liability not the beneficiaries, however in this case you should not need the residential NRB as she is a widow you can claim her husband’s unused NRB as per my previous post.

If your father did not leave everything to your mother and there is no available transferable NRB then you will have to use her RNRB, but if her home is only worth £70k then you will only be able to claim £70k of RNRB not the full £175k unless she has downsized in the recent past.

DRS1

So what is the total value of the estate?  Is it under £325k?

Cluffbert

DRS1 said:

So what is the total value of the estate?  Is it under £325k?

Not much over but  above £325k   but  below  £500k

DRS1

So in the worst case scenario where there is no NRB or RNRB to pass from your father to your mother she has her own NRB of £325K plus the let's say £70K RNRB which means if the estate is below £395k there is no IHT to pay.

70K seems a bit low for a house - have you been deducting a mortgage to get to that figure?