Inheritance Tax question

[rehab71]

After a bit of advice please.

My MIL has recently died after a short illness and quite early in life and very unexpected. I think her estate is worth circa £450k, she had no debt. She is single I should mention.

My question is, I know the tax threshold is £325k but I seem to remember reading that if someone has recently inherited and then die then tax wouldn't be due again? My MILs father died last year and tax was paid on what my MIL inherited, is there a way that my wife and her sister won't be faced with this (ridiculous and unfair) tax?

Hope that makes sense?

Thanks

[Eric Mc]

I thought that only married couples (or couples in Civil partnerships) could inherit their late spouse's Nil Rate Band?

[randlemarcus]

When you say ridiculous and unfair, I have some sympathy with that, but its eminently avoidable if planned for.

[rehab71]

randlemarcus said:

When you say ridiculous and unfair, I have some sympathy with that, but its eminently avoidable if planned for.

Quite, but she was only 64 and was diagnosed with cancer dead 3 weeks later.

[TFP]

Google 'Quick Succession Relief'.

[Simpo Two]

I make it:
£325,000 tax free
£125,000 @ 40% = £75,000
Winnings: £400,000

But stand to be corrected by a pro.

[TwigtheWonderkid]

Simpo Two said:

I make it:
£325,000 tax free
£125,000 @ 40% = £75,000
Winnings: £400,000

But stand to be corrected by a pro.

Agreed. £200K each. Given that people who work to earn their money start paying tax at £11600, getting £325K (or £650K if spouse allowance used) tax free on unearned money doesn't seem that unfair.

[Simpo Two]

TwigtheWonderkid said:

Given that people who work to earn their money start paying tax at £11600, getting £325K (or £650K if spouse allowance used) tax free on unearned money doesn't seem that unfair.

But that money has aready had all due taxes paid on it by the previous owner. Hence the remainder should be (in a fair world haha) viewed as tax paid.

[TwigtheWonderkid]

Simpo Two said:

TwigtheWonderkid said:

Given that people who work to earn their money start paying tax at £11600, getting £325K (or £650K if spouse allowance used) tax free on unearned money doesn't seem that unfair.

But that money has aready had all due taxes paid on it by the previous owner. Hence the remainder should be (in a fair world haha) viewed as tax paid.

No it hasn't. OP said MIL inherited it recently of her father. So MIL got it tax free and unearned. And I bet most of it was accrued by MIL's father as a result of house price inflation, which has never had any tax paid on it.

Most money that people inherit is down to house price inflation. So this mantra of "it's already been taxed once" is a bit of a myth.

[Jockman]

TwigtheWonderkid said:

No it hasn't. OP said MIL inherited it recently of her father. So MIL got it tax free and unearned. And I bet most of it was accrued by MIL's father as a result of house price inflation, which has never had any tax paid on it.

Most money that people inherit is down to house price inflation. So this mantra of "it's already been taxed once" is a bit of a myth.

Indeed. But it's bloomin' annoying

[Simpo Two]

TwigtheWonderkid said:

No it hasn't. OP said MIL inherited it recently of her father. So MIL got it tax free and unearned

By 'previous owner' I meant the deceased. Yes you could argue that some of estate might be capital gain on property, so perhaps CGT would be more relevant. Anyway, as 'tax freedom day' is now 2 June I think we could do with a break.

[rehab71]

TFP said:

Google 'Quick Succession Relief'.

That's the wording I was looking for, thanks. Fingers crossed my wife and sister in law won't have to pay a chunk to HMRC!

[Mark300zx]

Are you saying the your wife and SIL will have 425k each, I presume they are the only beneficiaries, if so they can change the will to include you, then there is no iht to pay on 850K, I know a decent IHT lawyer which you should really consult, particularly after my amateur whitterings?