Inheritance tax query

Gruppe8

I hope someone can shed some light on this. My question is about inheritance tax and the approximate amount payable and if it can be reduced.

My mother is in her nineties, I am the sole beneficiary of my mothers will, she has left her property to myself in the will, my understanding is that the threshold is 325k but i will receive 175k in addition because of the property so 500k in total, My father passed away without a will intestate in 1983, the property was in joint names and my mother ended up with the property, at that time the value would be around 60k, so hopefully  am I right with the 500k but would i have part of my fathers inheritance tax threshold to add to the 500k ?? if so how much, thanks in advance for any advice   

poseidon1

Gruppe8 said:

I hope someone can shed some light on this. My question is about inheritance tax and the approximate amount payable and if it can be reduced.

My mother is in her nineties, I am the sole beneficiary of my mothers will, she has left her property to myself in the will, my understanding is that the threshold is 325k but i will receive 175k in addition because of the property so 500k in total, My father passed away without a will intestate in 1983, the property was in joint names and my mother ended up with the property, at that time the value would be around 60k, so hopefully  am I right with the 500k but would i have part of my fathers inheritance tax threshold to add to the 500k ?? if so how much, thanks in advance for any advice   

As long as your mother received your father's entire estate in 1983 by reason of the intestacy rules as they were at the time, then on your mother's death in addition to her NRBs you get;

1) You father's entire NRB ( currently £325k )
2) £100k of the residence nil rate band  based on specific rules related to pre 2017 deaths.

However 1) above maybe conditional upon your mother acquiring your father's share of the property outright as surviving joint tenant, since the statutory Widow's legacy under intestacy rules at that time was  £40,000 ( where there are surviving children ).

Assuming you are correct about the £60k value of the property at that time, your father's remaining assets ( inherited by your mother) would likely need to be below £10k to comfortably ensure retention of your father's entire NRB for future transfer purposes on your mother's eventual death.

Keep_pedalling

The problem with such a gap between the deaths it there is a very strong chance that there.will be no records for the first death unless probate was required. If the lived in England or Wales you can check to see if there any probate records for him.

https://www.gov.uk/search-will-probate

If I were you and you find that probate was not applied for, I think it would be fairly safe to claim the full transferable NRB as HNrC will have no records either. 

Gruppe8

Thanks for both your replies , i found a probate listed for June 1983 and it lists as under 25k, my father only had a watch as assets worth £300 my estimate on the house must have been to high it was 38k in 1980 both you your help is most appreciated, and anymore additional info on these new facts would be helpful thanks  

poseidon1

Gruppe8 said:

Thanks for both your replies , i found a probate listed for June 1983 and it lists as under 25k, my father only had a watch as assets worth £300 my estimate on the house must have been to high it was 38k in 1980 both you your help is most appreciated, and anymore additional info on these new facts would be helpful thanks  

On this basis sounds like on mother's death you will indeed have 2 x £325k NRBs, mother's residence nrb ( £175k) and father's residence nrb ( £100k).

Hopefully this total of £925k of NRBs will suffice to cover the entire value of your mother's estate.

Smudgeismydog

I was under the impression that deaths prior to the introduction of the RNRB would still qualify for the full allowance, as per HMRC guidance below, so the OP would have £1m available;


Any residence nil rate band (RNRB) that’s not used when someone dies can go to their spouse or civil partner’s estate when they die. This transfer can also happen if the first of the couple died before 6 April 2017, even though the residence nil rate band was not available at that time.

Where the first of the couple died before 6 April 2017 their estate would not have used any of the residence nil rate band as it was not available. So 100% of this tax-free allowance will be available for transfer unless their estate was worth more than £2 million and the residence nil rate band is tapered away.

poseidon1

Smudgeismydog said:

I was under the impression that deaths prior to the introduction of the RNRB would still qualify for the full allowance, as per HMRC guidance below, so the OP would have £1m available;


Any residence nil rate band (RNRB) that’s not used when someone dies can go to their spouse or civil partner’s estate when they die. This transfer can also happen if the first of the couple died before 6 April 2017, even though the residence nil rate band was not available at that time.

Where the first of the couple died before 6 April 2017 their estate would not have used any of the residence nil rate band as it was not available. So 100% of this tax-free allowance will be available for transfer unless their estate was worth more than £2 million and the residence nil rate band is tapered away.

Respectfully nothing in the HMRC residence nil rate band link you appended supports the contention that the death of the first spouse prior to April 2017 attracts the current full RNRB of £175k.

Indeed even for deaths after April 2017 the RNRB transferable may be less than £175k depending on when first spouse died. The RNRB Commenced  at £100k and rose in £25k annual increments to £175k as from 6 April 2020 where it has remained 'frozen'. Only 1st spouse deaths after 6 April 2020 attracts £175k.




As for pre 2017 deaths I refer you to  section 8(g) (4) Inheritance Tax Act 1984  (below)  which clearly sets out the £100k limitation.

https://www.legislation.gov.uk/ukpga/1984/51/section/8G#:~:text=[F18GMeaning of “brought,or after 6 April 2017.&text=(b)immediately before the other,person's spouse or civil partner

Admittedly this does not appear to be commonly understood.

SoozyJ22

poseidon1 said:

As long as your mother received your father's entire estate in 1983 by reason of the intestacy rules as they were at the time, then on your mother's death in addition to her NRBs you get;

1) You father's entire NRB ( currently £325k )
2) £100k of the residence nil rate band  based on specific rules related to pre 2017 deaths.

This is incorrect - the full £175,000 is available to transfer (subject to any tapering). 

https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

You calculate the % of unused RNRB from the first death which will always be 100% if the death was pre-RNRB, then multiply that by the RNRB in effect at the second death.

From the website:

You calculate the actual amount that’s transferred to the surviving spouse or civil partner’s estate in 2 steps:

1. Work out the percentage of residence nil rate band that was not used when the first of the couple died. You do this by dividing the unused amount of threshold by the total that was available when the first of the couple died and multiplying the result by 100. If the person died before 6 April 2017 the unused residence nil rate band and total available are both deemed to be £100,000 so the unused percentage is 100%.

2. Multiply the percentage of unused residence nil rate band when the first of the couple died by the maximum residence nil rate band available at the time of the survivor’s death. This gives you the sum available to transfer.

This is backed up by the example which shows a transferred RNRB of £150,000 where the first death was in 2015. 

Gruppe8

Thanks for all your reply's, its been very helpful, The estate is around 800-850k so would i be inside the tax threshold in this case ??  thanks in advance 

Smudgeismydog

SoozyJ22 said:

poseidon1 said:

As long as your mother received your father's entire estate in 1983 by reason of the intestacy rules as they were at the time, then on your mother's death in addition to her NRBs you get;

1) You father's entire NRB ( currently £325k )
2) £100k of the residence nil rate band  based on specific rules related to pre 2017 deaths.

This is incorrect - the full £175,000 is available to transfer (subject to any tapering). 

https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

You calculate the % of unused RNRB from the first death which will always be 100% if the death was pre-RNRB, then multiply that by the RNRB in effect at the second death.

From the website:

You calculate the actual amount that’s transferred to the surviving spouse or civil partner’s estate in 2 steps:

1. Work out the percentage of residence nil rate band that was not used when the first of the couple died. You do this by dividing the unused amount of threshold by the total that was available when the first of the couple died and multiplying the result by 100. If the person died before 6 April 2017 the unused residence nil rate band and total available are both deemed to be £100,000 so the unused percentage is 100%.

2. Multiply the percentage of unused residence nil rate band when the first of the couple died by the maximum residence nil rate band available at the time of the survivor’s death. This gives you the sum available to transfer.

This is backed up by the example which shows a transferred RNRB of £150,000 where the first death was in 2015. 

Thank you @SoozyJ22,  this is as per my understanding. 

It’s the unused percentage of the Residence Nil Rate band that’s transferred and not the unused amount. This makes sure that if the maximum amount of Residence Nil Rate Band increases over time, the survivor’s estate will benefit from the increase in the threshold.

Smudgeismydog

Gruppe8 said:

The estate is around 800-850k so would i be inside the tax threshold in this case?

From what you’ve said the full £1m would be available, so yes, this would fit within the available allowances