IHT "Home allowance"

[Hosenbugler]

Further to this article about the draconian increase in probate fees.

http://www.msn.com/en-gb/money/personalfinance/new...

The article mentions, and I quote "The changes come into force at the same time as more families are taken out of inheritance tax entirely, as a result of the new "family home allowance" .

Can anyone simpley explain what the "family home allowance" means in the context of inheritance tax?Or indeed point me to something which explains the matter in laymans terms.

Does it mean , for example that the property of the home is not counted in the value of the deceased estate? The IHT threshold is horrendously low at £325000 and a big worry to many of us. IHT , as I recall was introduced to restrict the power of the immensely wealthy back in the 1890's , its now a tax that just about anyone who is moderately successfull is threatened by .I've taken steps concerning my own estate, but you have to live somewhere.

[spoofking]

The home allowance is all explained here

https://www.gov.uk/guidance/inheritance-tax-reside...

Basically allows some of the family home to increase your Nil Rate Band, eventually becoming £1mill, for a married couple.

[anonymous-user]

IHT is one of the huge taxes on "Living In The South of England".

See also, Stamp Duty.

[Hosenbugler]

Thanks for the input all. The link explained things even I can understand. Not as many hoops to jump through as I thought there might be, but they are still tinkering around the edges. There has been no change is the already harshly low threshold since 2009. Should be at least doubled IMHO.

Even worse, the annual amount you can give away without a tax burden has been £3000 since 1981.If that had risen in line with inflation it would now be north of £11000 . Governments, eh? Don't they know how to plunder other peoples money.

[anonymous-user]

Hosenbugler said:

Even worse, the annual amount you can give away without a tax burden has been £3,000 since 1981.

That's not really correct. You can give away as much as you like completely tax free - a tax charge only arises if you die within 7 years afterwards. So smart people arrange their affairs well before old age. The maximum rate of tax is 40%

Compare the situation before 1986 when IHT replaced the former Capital Transfer Tax. Under CTT there was an IMMEDIATE tax charge on lifetime gifts, with a maximum rate of 75%.

[Hosenbugler]

rockin said:

Hosenbugler said:

Even worse, the annual amount you can give away without a tax burden has been £3,000 since 1981.

That's not really correct. You can give away as much as you like completely tax free - a tax charge only arises if you die within 7 years afterwards. So smart people arrange their affairs well before old age. The maximum rate of tax is 40%

Compare the situation before 1986 when IHT replaced the former Capital Transfer Tax. Under CTT there was an IMMEDIATE tax charge on lifetime gifts, with a maximum rate of 75%.

Yes, have already done so . Although a friend of mine fell foul of that 7 year rule, his Father gifted him a considerable sum and died tragically only months after. Not a good situation. Fact is, to me, that £3000 is way too low, should be able to give away far larger sums without having to worry about tax law. All subjective I suppose though.

[brickwall]

Hosenbugler said:

rockin said:

Hosenbugler said:

Even worse, the annual amount you can give away without a tax burden has been £3,000 since 1981.

That's not really correct. You can give away as much as you like completely tax free - a tax charge only arises if you die within 7 years afterwards. So smart people arrange their affairs well before old age. The maximum rate of tax is 40%

Compare the situation before 1986 when IHT replaced the former Capital Transfer Tax. Under CTT there was an IMMEDIATE tax charge on lifetime gifts, with a maximum rate of 75%.

Yes, have already done so . Although a friend of mine fell foul of that 7 year rule, his Father gifted him a considerable sum and died tragically only months after. Not a good situation. Fact is, to me, that £3000 is way too low, should be able to give away far larger sums without having to worry about tax law. All subjective I suppose though.

I also believe you are allowed to give gifts out of 'surplus income' (which would be open to interpretation, but I'd guess it couldn't reduce the value of your capital estate).

If you're really worried about the 7 year liability (and quite young), then take out a 7-year tapering life insurance policy for the amount of the gift.

[TFP]

brickwall said:

Hosenbugler said:

rockin said:

Hosenbugler said:

Even worse, the annual amount you can give away without a tax burden has been £3,000 since 1981.

That's not really correct. You can give away as much as you like completely tax free - a tax charge only arises if you die within 7 years afterwards. So smart people arrange their affairs well before old age. The maximum rate of tax is 40%

Compare the situation before 1986 when IHT replaced the former Capital Transfer Tax. Under CTT there was an IMMEDIATE tax charge on lifetime gifts, with a maximum rate of 75%.

Yes, have already done so . Although a friend of mine fell foul of that 7 year rule, his Father gifted him a considerable sum and died tragically only months after. Not a good situation. Fact is, to me, that £3000 is way too low, should be able to give away far larger sums without having to worry about tax law. All subjective I suppose though.

I also believe you are allowed to give gifts out of 'surplus income' (which would be open to interpretation, but I'd guess it couldn't reduce the value of your capital estate).

If you're really worried about the 7 year liability (and quite young), then take out a 7-year tapering life insurance policy for the amount of the gift.

Take care on that tapering point.

Taper Relief only applies where the total of gifts in the preceding 7 years exceeds the nil rate band.