Inheritance tax question

kormachameleon

My husband and I have savings worth £400k. We don't own our home (we rent). We have 2 adult sons who we'll leave our money to in equal proportions (we've written wills). If we both died a) at the same time or b) within the same year, am I correct in thinking that £75k would be subject to inheritance tax? Sorry if this is a stupid question. 

poseidon1

kormachameleon said:

My husband and I have savings worth £400k. We don't own our home (we rent). We have 2 adult sons who we'll leave our money to in equal proportions (we've written wills). If we both died a) at the same time or b) within the same year, am I correct in thinking that £75k would be subject to inheritance tax? Sorry if this is a stupid question. 

Short answer no, assuming each spouse gifts entire estate to the other and only on death of the survivor do the children then inherit.

 Remember you each have £325k  nil rate bands ( NRB) , so total £650k exempt amount to shelter your £400k joint estate. You seem to think there is only one NRB shared between you.

Emmia

Do your wills leave everything to the surviving spouse first and then to kids? 

There will be no IHT as the £325k limit is per person, and spouses can use up any remaining allowance on the second death. 

In addition, there are more IHT allowances for kids taking you up to £1M IHT free (currently)

eskbanker

Emmia said:

In addition, there are more IHT allowances for kids taking you up to £1M IHT free (currently)

But not for those (such as OP and husband) who don't own their home?

Emmia

eskbanker said:

Emmia said:

In addition, there are more IHT allowances for kids taking you up to £1M IHT free (currently)

But not for those (such as OP and husband) who don't own their home?

That's true - personally I'd be avoiding renting in retirement, especially if I had £400k in the bank.

kormachameleon

Thanks everyone. That's a big help. I was confused about what would happen on the second death, ie whether the second death would allow my boys to inherit a total of £325k or £650k before being liable for inheritance tax. Thanks for pointing out that the double NRB would apply.
And no, we don't own a home.
Thanks again.