Inheritance - tax question
Discussion
If a family member passes, has an estate valued at approx £450k, and splits it up 4 ways - 2x£150k and 2x£75k (4 people) who would pay tax, and how much, under the current legislation? Do they all get taxed the same amount from a blanket £450k, or do the people getting each amount get taxed differently?
Many thanks!
Many thanks!
TyrannosauRoss Lex said:
If a family member passes, has an estate valued at approx £450k, and splits it up 4 ways - 2x£150k and 2x£75k (4 people) who would pay tax, and how much, under the current legislation? Do they all get taxed the same amount from a blanket £450k, or do the people getting each amount get taxed differently?
Many thanks!
If what you are asking is, in effect, who bears the IHT liability, it would depend upon the drafting of the will.Many thanks!
Absent anything else, they will probably bear any liability pro rata, but there is no way of being sure on the information you have provided.
Estate pays IHT, executor sorts out who gets what in line with the will (if there is one).
https://www.gov.uk/inheritance-tax
https://www.gov.uk/inheritance-tax
boombang said:
Estate pays IHT, executor sorts out who gets what in line with the will (if there is one).
https://www.gov.uk/inheritance-tax
This, as boombang said.https://www.gov.uk/inheritance-tax
IHT is paid from the Estate before probate. Then, after any of the expenses, eg probate and administration costs of all kinds, the balance of the Estate is paid to the beneficiaries according to the Will. If the Will stipulates four beneficiaries to each get the same share...25%...then that's what they will get out of the net Estate assets.
The Leaper said:
This, as boombang said.
IHT is paid from the Estate before probate. Then, after any of the expenses, eg probate and administration costs of all kinds, the balance of the Estate is paid to the beneficiaries according to the Will. If the Will stipulates four beneficiaries to each get the same share...25%...then that's what they will get out of the net Estate assets.
More complete answer than mine IHT is paid from the Estate before probate. Then, after any of the expenses, eg probate and administration costs of all kinds, the balance of the Estate is paid to the beneficiaries according to the Will. If the Will stipulates four beneficiaries to each get the same share...25%...then that's what they will get out of the net Estate assets.
In your case is it %ages or values?
You can get bequeaths of specific amounts in wills, so distribution can depend on precisely what is left net versus what is written - and it could be the case less is left than the sum of bequeaths, leaving an executor in an interesting position.
Unless there is no property at all as part of the estate there shouldn't be any inheritance tax liability on that amount.
In fact if their main property is worth £125,000 or more (as part of the £450k estate) there will be no tax providing it is given away to either their children or grand children.
In fact if their main property is worth £125,000 or more (as part of the £450k estate) there will be no tax providing it is given away to either their children or grand children.
Edited by nickfrog on Monday 28th February 17:28
Unfortunately going through this as Mum died last May and FIL died in Jan. If spouse inheriting part of the estate that can be done free of IHT through spousal allowance. If predeceased by spouse then deferred IHT allowance can be used.
Example my Mum left everything to my Dad bar £10k that came to me. You get £325k IHT allowance, as all the estate apart from £10k went to my Dad under spousal allowance when my Dad goes, i'll get to use the whole of his £325k allowance and £315k from my Mum (£325k minus my £10k). So check if there is any unused allowance from previous passing.
Also if there is going to be taxed payable you only have 6 months to get the forms in before interest will be chargable.
Example my Mum left everything to my Dad bar £10k that came to me. You get £325k IHT allowance, as all the estate apart from £10k went to my Dad under spousal allowance when my Dad goes, i'll get to use the whole of his £325k allowance and £315k from my Mum (£325k minus my £10k). So check if there is any unused allowance from previous passing.
Also if there is going to be taxed payable you only have 6 months to get the forms in before interest will be chargable.
nickfrog said:
In fact if their main property is worth £125,000 or more (as part of the £450k estate) there will be no tax providing it is given away to either their children or grand children.
That's a new one on me. So if you leave your house to a child or grandchild, anything over £125K of its value is exempt from IHT?Simpo Two said:
That's a new one on me. So if you leave your house to a child or grandchild, anything over £125K of its value is exempt from IHT?
It doesn't even need to be that much. The best case scenario for a widow is a £1M IHT allowance including main property.https://www.rollits.com/news/articles/1m-inheritan...
Edited by nickfrog on Monday 28th February 18:37
Seems a lot of misinformation here. We need further information to give a fuller answer.
Who are the beneficiaries, if they are children or grandchildren then there is potentially an additional £175k of allowance available if giving them a house. May even be another (up to £175k) depending on when their spouse died. Could even be another £325k from a spouse as well. So potentially £650k + £350k of tax free allowances available before paying tax.
There are also potentially exempt transfers, involving any transfers that have been made in the last 7 years, with this size of estate it is highly likely they would be using any thresholds first before the big lumps you are talking about are paid out.
Who are the beneficiaries, if they are children or grandchildren then there is potentially an additional £175k of allowance available if giving them a house. May even be another (up to £175k) depending on when their spouse died. Could even be another £325k from a spouse as well. So potentially £650k + £350k of tax free allowances available before paying tax.
There are also potentially exempt transfers, involving any transfers that have been made in the last 7 years, with this size of estate it is highly likely they would be using any thresholds first before the big lumps you are talking about are paid out.
Edited by thepeoplespal on Monday 28th February 20:03
thepeoplespal said:
Seems a lot of misinformation here. We need further information to give a fuller answer.
Who are the beneficiaries, if they are children or grandchildren then there is potentially an additional £125k of allowance available if giving them a house. May even be another £125k depending on when their spouse died. Could even be another £325k from a spouse as well. So potentially £650k + £250k of tax free allowances available before paying tax.
There are also potentially exempt transfers, involving any transfers that have been made in the last 7 years, with this size of estate it is highly likely they would be using any thresholds first before the big lumps you are talking about are paid out.
The person is widowed. She has all the estate after her husband died, when he died nothing went to anyone except her. Estate worth approx £500k, house approx £450k.Who are the beneficiaries, if they are children or grandchildren then there is potentially an additional £125k of allowance available if giving them a house. May even be another £125k depending on when their spouse died. Could even be another £325k from a spouse as well. So potentially £650k + £250k of tax free allowances available before paying tax.
There are also potentially exempt transfers, involving any transfers that have been made in the last 7 years, with this size of estate it is highly likely they would be using any thresholds first before the big lumps you are talking about are paid out.
1/3 of the house going to one of her children, another 1/3 to another child, and 2x1/6 to each of 2 grandchildren.
Depending on how long ago they died (spouse), probably despite it there is likely to be £0 tax, given they have £325k+£175k (house nil rate band), before their spouse's threshold starts to get used.
https://www.gov.uk/government/publications/rates-a...
You'll still have to calculate their money they gave away over the last 7 years which is a bit of a pain. There is a £3000 annual allowance and small gift exemptions too.
So lots of paperwork to do, but no tax to pay unless there have been a lot of cash gifts in last 7 years which must be 1st to use available thresholds before it comes to property.
(Sorry about £125k, that is the figure I had in my mind for MIL when I was helping)
https://www.gov.uk/government/publications/rates-a...
You'll still have to calculate their money they gave away over the last 7 years which is a bit of a pain. There is a £3000 annual allowance and small gift exemptions too.
So lots of paperwork to do, but no tax to pay unless there have been a lot of cash gifts in last 7 years which must be 1st to use available thresholds before it comes to property.
(Sorry about £125k, that is the figure I had in my mind for MIL when I was helping)
Edited by thepeoplespal on Monday 28th February 20:08
Grandad Gaz said:
nickfrog said:
^ £0 inheritance tax.
That was my thinking too.Just to clarify, is it £325K for each partner? When one of them dies it is transferred across to the other. So, when the other dies, the amount before inheritance tax kicks in on the value of the estate, is £650K?
https://www.rollits.com/news/articles/1m-inheritan...
Problem is with property price inflation it's not always difficult to breach that £1M as that figure is bound to not evolve much and unlikely it would keep up.
Edited by nickfrog on Tuesday 1st March 11:22
Father passed away 5 years ago and all his allowances passed to mother.
She died in Jan 2021 and I was her executor. Her estate included proceeds from a house sale,savings accounts and the sale of a flat.
Probate was granted in the sum of 610k,with no IHT due.
I was helped in sorting probate by an independent probate expert, not a solicitor, who was very knowledgeable and charged a sensible amount.
She helped me through all the documentation and made sure it was all correct before submitting.So I had no problems in obtaining probate.
If any one in the Yorkshire,North East areas needs this sort of help,can I recommend;
Janette.sanderson@wcukprofessional.co.uk.
She died in Jan 2021 and I was her executor. Her estate included proceeds from a house sale,savings accounts and the sale of a flat.
Probate was granted in the sum of 610k,with no IHT due.
I was helped in sorting probate by an independent probate expert, not a solicitor, who was very knowledgeable and charged a sensible amount.
She helped me through all the documentation and made sure it was all correct before submitting.So I had no problems in obtaining probate.
If any one in the Yorkshire,North East areas needs this sort of help,can I recommend;
Janette.sanderson@wcukprofessional.co.uk.
thepeoplespal said:
Depending on how long ago they died (spouse), probably despite it there is likely to be £0 tax, given they have £325k+£175k (house nil rate band), before their spouse's threshold starts to get used.
https://www.gov.uk/government/publications/rates-a...
You'll still have to calculate their money they gave away over the last 7 years which is a bit of a pain. There is a £3000 annual allowance and small gift exemptions too.
So lots of paperwork to do, but no tax to pay unless there have been a lot of cash gifts in last 7 years which must be 1st to use available thresholds before it comes to property.
(Sorry about £125k, that is the figure I had in my mind for MIL when I was helping)
I'm her grandson and she often gives me the odd £20-50 or so to get some bits for her (food shopping mainly) when I pop over, how does this work then? Would these transactions be included?!!?https://www.gov.uk/government/publications/rates-a...
You'll still have to calculate their money they gave away over the last 7 years which is a bit of a pain. There is a £3000 annual allowance and small gift exemptions too.
So lots of paperwork to do, but no tax to pay unless there have been a lot of cash gifts in last 7 years which must be 1st to use available thresholds before it comes to property.
(Sorry about £125k, that is the figure I had in my mind for MIL when I was helping)
Edited by thepeoplespal on Monday 28th February 20:08
I know it sounds vain of me to ask but I'm just curious since she brought up inheritance the other day.
Many thanks.
TyrannosauRoss Lex said:
I'm her grandson and she often gives me the odd £20-50 or so to get some bits for her (food shopping mainly) when I pop over, how does this work then? Would these transactions be included?!!?
I know it sounds vain of me to ask but I'm just curious since she brought up inheritance the other day.
Many thanks.
If you are buying bits for her there is no gift to you. There are allowances and exemptions for gifts.I know it sounds vain of me to ask but I'm just curious since she brought up inheritance the other day.
Many thanks.
https://www.gov.uk/inheritance-tax/gifts
"Using allowances to give tax free gifts
Each tax year, you can also give away some money or possessions free of Inheritance Tax. How much is tax free depends on which allowances you use.
Annual exemption
You can give away a total of £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your ‘annual exemption’.
You can give gifts or money up to £3,000 to one person or split the £3,000 between several people.
You can carry any unused annual exemption forward to the next tax year - but only for one tax year.
The tax year runs from 6 April to 5 April the following year.....
Small gift allowance
You can give as many gifts of up to £250 per person as you want each tax year, as long as you have not used another allowance on the same person.
Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.
Gifts for weddings or civil partnerships
Each tax year, you can give a tax free gift to someone who is getting married or starting a civil partnership. You can give up to:
£5,000 to a child
£2,500 to a grandchild or great-grandchild
£1,000 to any other person
If you’re giving gifts to the same person, you can combine a wedding gift allowance with any other allowance, except for the small gift allowance.
For example, you can give your child a wedding gift of £5,000 as well as £3,000 using your annual exemption in the same tax year.
If you make regular payments
You can make regular payments to help with another person’s living costs. There’s no limit to how much you can give tax free, as long as:
you can afford the payments after meeting your usual living costs
you pay from your regular monthly income
These are known as ‘normal expenditure out of income’. They include:
paying rent for your child
paying into a savings account for a child under 18
giving financial support to an elderly relative
If you’re giving gifts to the same person, you can combine ‘normal expenditure out of income’ with any other allowance, except for the small gift allowance.
For example, you can give your child a regular payment of £60 a month (a total of £720 a year) as well as using your annual exemption of £3,000 in the same tax year."
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