Income tax avoidance

GrumpyDil

Argonauts said:

Can you explain how much the estate will have when second parent dies is it a million as previous thought or 650 k 2x325 only

i have seen on many websites it’s one million
can somebody state the actual figure and how it is achieved

It will be 2x325k plus up to 2x175k but the 2x175k is limited to the value of the property that it is related to so currently 245k but given property value movement that is likely to increase over time.

Argonauts

So it’s 2x 325
plus the value of your house
thats what the estate leaves tax free

anything above £650,000 and house value
is up for inheritance tax at 40%

Is this correct ?


no £175000 go to estate

Albermarle

Argonauts said:

So it’s 2x 325
plus the value of your house
thats what the estate leaves tax free

anything above £650,000 and house value
is up for inheritance tax at 40%

Is this correct ?


no £175000 go to estate

In your current situation yes. However; Your house could increase in value, which would increase the RNRB you could use. Plus lots of unknowns for the future regarding how long you live, changes in legislation etc

There are quite a lot of similar type threads/questions on the forum recently, so worth reading those. 

Also usually helps not to get too hung up about paying tax,as it in the end is what makes the world go round to some extent. As the saying goes - only two things are certain in life - Death & Taxes.

AlanP_2

Argonauts said:

So it’s 2x 325
plus the value of your house
thats what the estate leaves tax free

anything above £650,000 and house value
is up for inheritance tax at 40%

Is this correct ?


no £175000 go to estate

No, it is 2 * £325k so £650k plus the value of the house up to a MAXIMUM of £350k.

Absolute maximum is therefore £1m but could be less dependent on value of house.

Argonauts

See below is what I presume

one million and under is tax free

The Residence Nil-Rate Band – A Big Booster

The Residence Nil-Rate Band (RNRB) helps families pass on their homes without high taxes. It adds an extra tax-free allowance of £175,000 per person when the house goes to direct descendants, like children or grandchildren.

Like the Nil-Rate Band (NRB), the RNRB can be shared between spouses or civil partners. If neither parent uses this allowance, the estate can get a total RNRB of £350,000. Combined with the £650,000 NRB, the total tax-free limit rises to £1 million, a big advantage for families with valuable homes.

There are some rules. To receive the full RNRB, the estate must be worth under £2 million, and the property must have been the deceased’s main home. If the estate is worth more, the RNRB amount decreases. Getting advice early can help you plan your estate to keep this important benefit.

p00hsticks

Argonauts said:

See below is what I presume

one million and under is tax free

As others have consistently pointed out above , this is only true  if the residence is worth at least £350,000. If it's  less then you can't claim the full RNRB, only up to the actual value of the property.  

GrumpyDil

Here's a link which explains you can only use up to the value of the house taken from gov.uk.

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

Argonauts

No mention here of house values!!

What do children of a second deceased parent inherit tax free?

if the estate was passed from one parent to another, then after the death of the second parent, (assuming both were married or in a civil partnership), the tax exemption equates to (2 x RNRB) + (2 x NRB) = up to £1000000 tax free inheritance.

Breaking it down:

1. Nil-Rate Band (NRB):
   • The standard NRB for an individual is £325,000.
   • If the first spouse did not use any of their NRB (because, for example, their entire estate passed to the surviving spouse, which is IHT-exempt), then 100% of their NRB can be transferred.
   • Upon the second spouse’s death, their estate can use both their own NRB (£325,000) and the transferred NRB from their spouse (£325,000), totaling £650,000.
2. Residence Nil-Rate Band (RNRB):
   • The RNRB for an individual is £175,000.
   • If the first spouse did not use any of their RNRB (perhaps because they didn’t own a qualifying residence or passed it directly to their spouse), then 100% of their RNRB can also be transferred.
   • Upon the second spouse’s death, their estate can use both their own RNRB (£175,000) and the transferred RNRB from their spouse (£175,000), totaling £350,000.

Total potential exemption:

• NRB: £325,000 (first spouse) + £325,000 (second spouse) = £650,000
• RNRB: £175,000 (first spouse) + £175,000 (second spouse) = £350,000
• Combined Total: £650,000 (NRB) + £350,000 (RNRB) = £1 million

This means that the estate of the second spouse can be exempt from inheritance tax on up to £1 million of its value, assuming all conditions are met for both the NRB and RNRB.

DRS1

Well it doesn't mention a house at all but it does have a get out clause at the end
"assuming all conditions are met for both the NRB and RNRB"

NoMore

DRS1 said:

Well it doesn't mention a house at all but it does have a get out clause at the end
"assuming all conditions are met for both the NRB and RNRB"

and it says up to £1 million not a definitive £1 million