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Inheritance tax

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  • Inheritance tax

    My elderly father has a total estate less than the £900,000 I believe he is able to leave in his will inheritance tax free.
    If this is the case, as his total worth is less than the inheritance tax threshold, is he able to give away gifts of any amount inheritance tax free, or is he subject to the £3000/year rule?
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  • #2
    Where has the £900k figure come from ? IHT is £325k or £650k if he has your late mother's allowance maybe? There's possibly an extra allowance for owning a property but not sure how you've got to a £900k allowance.

    If he only has his allowance of £325k then any gifts made now are included when calculating the final estate for IHT purposes. If he survives more than 7 years or if the value of the estate left plus the value of the gifts is still below the allowance when he dies there'd be no IHT.

    So if on death his estate was worth £300k but within the previous 7 years he'd gifted £100k - IHT (40%) would be due on the £75k over the allowance. des8 ? Think that's right isn't it ? ( less the £3 k )
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    • #3
      I think that there is a taper relief within the 7 years so that it's not an all or nothing matter.


      • #4
        I get £900,000 from - £325,000 from his own IHT allowance, £325,000 also allowed on my late mothers allowance which is added, and £250,000 IHT allowance from his house. I think I'm right but tax seems to be a minefield and it leaves me scratching my head!
        If I'm right and his total worth is less than his £900,000 IHT threshold the presumably IHT shouldn't be payable if he gives away some of his money.
        But I can't find this on any of the Government tax websites.


        • #5

          If someone dies on or after 6 April 2017 and their estate is above the basic IHT threshold, the estate may be entitled to an additional
          threshold (sometimes known as the residence nil rate band) . The extra amount for 2017 to 2018 is up to £100,000. for 2018 to 2019 the extra is £125,000.
          If your father's estate benefits from transferred additional threshold from his spouse who also passed in the relevant period it could amount to £250,000.
          The additional threshold only applies if the home is left to a direct descendant, but tapers away on estates valued over £2m.

          Gifts in the previous 7 years are taken into account on a tapering basis (as ostell ), but there is a£3000 pa gift allowance free of IHT


          • #6
            Are you saying even if he is below the threshold for IHT and he gives away more than the £3000 gift allowance it will be subject to IHT?


            • #7
              Hi 3Puddings,
              The personal gift allowance is separate from any IHT calculation. However any 'gift' over the personal allowance will need to be declared in the IHT forms. Taper relief is then applied to those 'gift' amounts depending on when in the 7 years prior to death the 'gift' was made. Asdes8 mentioned the residential nil rate band is only applicable in the event the primary residence is left to immediate descendants children and grandchildren. This may help:- https://www.gov.uk/inheritance-tax/gifts
              I am a qualified solicitor and am happy to try and assist informally, where needed.

              Any posts I make on LegalBeagles are for information and discussion purposes only and shouldn't be seen as legal advice. Any practical advice I give is without liability. I do not represent people on the forum.

              If in doubt you should always seek professional face to face legal advice.


              • #8
                Hi 3puddings, I've just been scouring the internet for answers to the same question on inheritance tax. My mother passed away recently (my dad died a few years ago) and left her house to me and my brother so I've been trying to figure out how much tax is payable. I found this inheritance tax calculator which seems to take into account unused allowances and gifts of property. Might be worth trying out?
                Want to know how much inheritance tax is payable? Find out with our free calculator. The only calculator updated to include the new residence nil rate band.


                • #9
                  Thankyou WILKS86


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