Can I use a Downsizing Addition for IHT calculation - Gift of 50% House to Child

File_Explorer

Hello Everyone,

I have a question relating to filling out the IHT 400 and using the Downsizing Addition to maximize the RNRB and TRNRB available.

Father and Son both lived in the property and it is the sons and was the fathers main and only residence. (50% ownership each, survivorship clause), with the sons 50% having been gifted in 2024.

Does this avoid a gift with reservation as the father is continuing to pay his share of bills etc. Would this then be a PET?

Upon death of the father -

Son (Executor) must declare £195K gift on the IHT forms (This is 50% of the house value at date of gift).

Fathers spouse pre-deceased father in 2023, so at time of gift £350K total RNRB plus TRNRB would have been available?

There is approximately £180K left to the son via the fathers will, ISA, bank etc.

With other gifts, the estate is close to the IHT threshold and may go over depending on whether a downsizing addition can be used.

My question is whether the downsizing addition can be used here – applied first to the market value of the fathers share of the house at the time of death, £220K, then the remaining £130K of the £350K RNRB allowance used against the money left in the will to the son? (£180K, so leaving only £50K of this monetary legacy to be included in the IHT calculation)?

Many thanks in advance for your time, much appreciated.

Kind Regards.

Keep_pedalling

No, this won’t be a gift with reservation so it is a PET (unless the son moves out within 7 years) and will remain in father’s estate for 7 years. If none of mother’s NRB was used his estate then 2 lots of NRB will be available so his estate would need to exceed £650k before either residential NRB would be need to be claimed so you would not need to do an IHT return.

File_Explorer

Hi,

Many thanks for the quick reply. Although there is £180K ish left to the son, other gifts have been given in the last 7 years, so the estate will be teetering on the edge of going over the IHT threshold, and would go over without any access to RNRB, sorry I didn't make that clear. Good to know the 2 lots of nill rate band are available - with this in mind would it work the way I sugested with the full £350K RNRB being able to be used to offset the fathers share of the house and then some of the £180K left to the son in the will?

Thanks again

Keep_pedalling

The downsizing rule should apply here if it is required.

File_Explorer

Great, thank you!