Inheritance allowances
Discussion
Apologies in advance but I'd like some clarity on a discussion I was having recently regarding inheritance allowances.
I saw that £325k is the allowance (also mentions another £175k for children) . Is this per the receiving individual for lifetime , or the allowance from one estate?
My parents are divorced.
If my dad leaves me £325k and then my mum does the same at £325k would all of it be tax free?
The actual numbers are off from my example but I just needed to make sense of this basic fact first.
I saw that £325k is the allowance (also mentions another £175k for children) . Is this per the receiving individual for lifetime , or the allowance from one estate?
My parents are divorced.
If my dad leaves me £325k and then my mum does the same at £325k would all of it be tax free?
The actual numbers are off from my example but I just needed to make sense of this basic fact first.
There is no limit on the amount of gifts you can receive tax free either during the givers' lifetimes or after their deaths.
Under UK Inheritance Tax rules all taxes are paid by the "giver" and none by the "receiver".
The only exception is if you try to be clever, give stuff away, then die within 7 years and imagine HMRC have been successfully cheated out of their slice of pie. HMRC can pursue the receiver of the gift, which was a Potentially Exempt Transfer, if the IHT is not paid by the estate of the deceased giver.
Under UK Inheritance Tax rules all taxes are paid by the "giver" and none by the "receiver".
The only exception is if you try to be clever, give stuff away, then die within 7 years and imagine HMRC have been successfully cheated out of their slice of pie. HMRC can pursue the receiver of the gift, which was a Potentially Exempt Transfer, if the IHT is not paid by the estate of the deceased giver.
Generally Individuals get £325k each and then a further £175k in respect of their main residence being left to a family member of £175k known as the Residence Nil Rate Band so in theory a total of £500k.
Spouse being left estates have in effect no limit.
When spouse then dies and left to say children a total of £1m can be left free of IHT.
When estate goes over £2m a taper reduction applies iro the RNRB ie over £2.35m then the £ 175k / £350k amount is lost so max that can be left is back to £325k / £500k.
Spouse being left estates have in effect no limit.
When spouse then dies and left to say children a total of £1m can be left free of IHT.
When estate goes over £2m a taper reduction applies iro the RNRB ie over £2.35m then the £ 175k / £350k amount is lost so max that can be left is back to £325k / £500k.
Panamax said:
There is no limit on the amount of gifts you can receive tax free either during the givers' lifetimes or after their deaths.
Under UK Inheritance Tax rules all taxes are paid by the "giver" and none by the "receiver".
The only exception is if you try to be clever, give stuff away, then die within 7 years and imagine HMRC have been successfully cheated out of their slice of pie. HMRC can pursue the receiver of the gift, which was a Potentially Exempt Transfer, if the IHT is not paid by the estate of the deceased giver.
So each parents estate is given a £500k allowance in my example? Under UK Inheritance Tax rules all taxes are paid by the "giver" and none by the "receiver".
The only exception is if you try to be clever, give stuff away, then die within 7 years and imagine HMRC have been successfully cheated out of their slice of pie. HMRC can pursue the receiver of the gift, which was a Potentially Exempt Transfer, if the IHT is not paid by the estate of the deceased giver.
alscar said:
Generally Individuals get £325k each and then a further £175k in respect of their main residence being left to a family member of £175k known as the Residence Nil Rate Band so in theory a total of £500k.
Spouse being left estates have in effect no limit.
When spouse then dies and left to say children a total of £1m can be left free of IHT.
When estate goes over £2m a taper reduction applies iro the RNRB ie over £2.35m then the £ 175k / £350k amount is lost so max that can be left is back to £325k / £500k.
No spouses are involved in this example. Spouse being left estates have in effect no limit.
When spouse then dies and left to say children a total of £1m can be left free of IHT.
When estate goes over £2m a taper reduction applies iro the RNRB ie over £2.35m then the £ 175k / £350k amount is lost so max that can be left is back to £325k / £500k.
So each parent would be able to leave £500k before we start looking at other ways to reduce the bill.
d8mok said:
Panamax said:
There is no limit on the amount of gifts you can receive tax free either during the givers' lifetimes or after their deaths.
Under UK Inheritance Tax rules all taxes are paid by the "giver" and none by the "receiver".
The only exception is if you try to be clever, give stuff away, then die within 7 years and imagine HMRC have been successfully cheated out of their slice of pie. HMRC can pursue the receiver of the gift, which was a Potentially Exempt Transfer, if the IHT is not paid by the estate of the deceased giver.
So each parents estate is given a £500k allowance in my example? Under UK Inheritance Tax rules all taxes are paid by the "giver" and none by the "receiver".
The only exception is if you try to be clever, give stuff away, then die within 7 years and imagine HMRC have been successfully cheated out of their slice of pie. HMRC can pursue the receiver of the gift, which was a Potentially Exempt Transfer, if the IHT is not paid by the estate of the deceased giver.
I think passing part ownership of home on first death can create issues, I'm sure someone more knowledgeable will be along shortly to confirm or correct me!
grumbas said:
That's my understanding, but the advice we've always had was for married couples to pass everything to their spouse which leaves the full £1m available on the second death (assuming being passed to their children).
I think passing part ownership of home on first death can create issues, I'm sure someone more knowledgeable will be along shortly to confirm or correct me!
Parents are divorced. I think passing part ownership of home on first death can create issues, I'm sure someone more knowledgeable will be along shortly to confirm or correct me!
d8mok said:
No spouses are involved in this example.
So each parent would be able to leave £500k before we start looking at other ways to reduce the bill.
Sorry I missed the divorced part but yes as individuals they could both still leave £500k assuming that taper impact wasn’t applicable. So each parent would be able to leave £500k before we start looking at other ways to reduce the bill.
The Residence Nil Rate Band of £175k has various stipulations in order to qualify for it.
It relates in essence to the residence being passed to direct descendants, passing it to a friend will not qualify for that allowance. If the property is put in trust it can cause issues, so worth establishing that status first.
Worth speaking to a financial adviser if possible, but ultimately if you just have questions, you can probably get what you need from Google.
It relates in essence to the residence being passed to direct descendants, passing it to a friend will not qualify for that allowance. If the property is put in trust it can cause issues, so worth establishing that status first.
Worth speaking to a financial adviser if possible, but ultimately if you just have questions, you can probably get what you need from Google.
omniflow said:
For simplicity - yes.
But if the main residence is worth less than £175K then that allowance reduces to the value of the main residence.
Thanks. But if the main residence is worth less than £175K then that allowance reduces to the value of the main residence.
I thought this was the case but was being told i was wrong. We are going to get some proper advice as particulary my mums situation is more complicated and worth quite a bit more than the allowances.
The Dictator said:
The Residence Nil Rate Band of £175k has various stipulations in order to qualify for it.
It relates in essence to the residence being passed to direct descendants, passing it to a friend will not qualify for that allowance. If the property is put in trust it can cause issues, so worth establishing that status first.
Worth speaking to a financial adviser if possible, but ultimately if you just have questions, you can probably get what you need from Google.
Yes they both have appointments to speak with advisors next week which prompted this discussion. I was being told that as the receiver I only get a lifetime inheritance allowance which i thought was incorrect. It relates in essence to the residence being passed to direct descendants, passing it to a friend will not qualify for that allowance. If the property is put in trust it can cause issues, so worth establishing that status first.
Worth speaking to a financial adviser if possible, but ultimately if you just have questions, you can probably get what you need from Google.
I'm an only child and all being left to me (and likely my daughter)
Dads portion is below the £325k limit by a little bit
Mum's portion is above the limit - and will be below 2m.
Edited by d8mok on Friday 9th January 20:23
omniflow said:
Like a lot of things these days, the official government web pages are actually very helpful and, in general, quite easy to understand.
But doesn't explicitly say the answer to my question hence asking. It says where the funds come from to pay the tax, but not anything about inheriting above the limit but split from two parents.
d8mok said:
But doesn't explicitly say the answer to my question hence asking.
It says where the funds come from to pay the tax, but not anything about inheriting above the limit but split from two parents.
The IHT allowance isnt YOUR allowance until you die. Its the allowance for the estate you are inheriting.It says where the funds come from to pay the tax, but not anything about inheriting above the limit but split from two parents.
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