Inheritance tax question.

[David A]

I thought I understood this along with the proposed changes coming up but since we had the will writing chap round there's a couple of things he said (no doubt trying to sell us stuff) that have left me confused.

Can someone answer what the tax implication on this scenario would be

225k house. 400k cash. Today

225k house. 400k cash. In 2020 (aren't there proposed changes coming in ???)

500k house. 300k cash and assets. Again today and in 2020.

Keeping it simple left from one person to another. No marriage involved. House solely owned. No charity donation etc. Assume nothing gifted in years prior.

Does the property matter or is it purely a £££ value of all cash and non cash assets.

[Eric Mc]

IHT is based on the value of the total estate.

[MW-M5]

From 2017, the property does matter, as there is a nil band being introduced on main residences in addition to the £325,000 threshold already in place. This nil band is being phased in as follows;

£100,000 in 2017 to 2018
£125,000 in 2018 to 2019
£150,000 in 2019 to 2020
£175,000 in 2020 to 2021

So whilst Eric is correct that IHT applies to the total estate, from 2017 onwards there could be significant differnece in the tax implactions depending on how the estate is made up.


Accordingly, in answer to the OP question, the liability in each scenarion would be (based on the house being the main residence);


225k house. 400k cash. Today- Tax bill= £120,000

225k house. 400k cash. In 2020 (aren't there proposed changes coming in ???) = £50,000

500k house. 300k cash and assets. Again today and in 2020. Now = £190,000 and in 2020 = £120000

Edited by MW-M5 on Sunday 10th January 09:37

[39sl]

I find this provides a good summary of now and in the future

http://www.telegraph.co.uk/finance/personalfinance...

[David A]

Thanks all. It is as I thought. These cheapy write your will people trying to scare story and upsell stuff confusing me.

Suspect where someone had a question about putting things into trust it was likely from a similar conversation!

David

[Ozzie Osmond]

One of the biggest problems with IHT planning is that it's all about guessing what the "rules" are going to be at the time you actually pop your clogs.

Sure, it's worth having a sensible Will because you might get run over by a bus tomorrow. But it's far more likely a Corbyn government will be in power by the time you die!

Trusts can be useful but their tax advantages are often pretty modest for many people and there are likely to be costs involved in setting up and running the trust.

Put simply, the most effective IHT planning involves "giving stuff away". And if you don't have anyone trustworthy to give it to - hang onto it...

[Simpo Two]

Ozzie Osmond said:

Sure, it's worth having a sensible Will because you might get run over by a bus tomorrow. But it's far more likely a Corbyn government will be in power by the time you die!

I think a Corbyn government is less likely than me winning the lottery.

And I don't do the lottery!

[Nick67]

It is not 100% clear as to who you are leaving the assets to, but it will have a big impact.

The new uplift Residence Nil Rate Band can be claimed where it is left to a direct descendant, which will be a child (including a step-child, adopted child or foster child) of the deceased and their lineal descendants.

If you downsize or move into a home you can still claim the RNRB, it can also be transferred to spouse/civil partner