Inheritance Tax

[kate]

I'm puzzled. There's all this talk about the forthcoming budget probably making changes to inheritance tax and inevitably more people's assets will be liable for it when die.

Now as I have understood it, it applies at present if your total assets are over £345,000.
It has just been said (on TV news) that only 4% of people currently fall into that category.

I find that incredible considering property values in most towns and cities are that or more at present.
So how come it only applies to 4% of the population?

I can only assume property values are not included? And yet I thought they were.
Have I got it all wrong?

[willien]

Oct 18, 2024 19:59:36 GMT kate said:

I'm puzzled. There's all this talk about the forthcoming budget probably making changes to inheritance tax and inevitably more people's assets will be liable for it when die.

Now as I have understood it, it applies at present if your total assets are over £345,000.
It has just been said (on TV news) that only 4% of people currently fall into that category.

I find that incredible considering property values in most towns and cities are that or more at present.
So how come it only applies to 4% of the population?

I can only assume property values are not included? And yet I thought they were.
Have I got it all wrong?

Property values are included and I agree with you the figure seems bizarre.  Only thing I can think of is that in the case of couples they have divided the property value in two and ignored the fact that one usually dies before the other.

[kate]

Oct 18, 2024 20:06:55 GMT willien said:

Oct 18, 2024 19:59:36 GMT kate said:

I'm puzzled. There's all this talk about the forthcoming budget probably making changes to inheritance tax and inevitably more people's assets will be liable for it when die.

Now as I have understood it, it applies at present if your total assets are over £345,000.
It has just been said (on TV news) that only 4% of people currently fall into that category.

I find that incredible considering property values in most towns and cities are that or more at present.
So how come it only applies to 4% of the population?

I can only assume property values are not included? And yet I thought they were.
Have I got it all wrong?

Property values are included and I agree with you the figure seems bizarre.  Only thing I can think of is that in the case of couples they have divided the property value in two and ignored the fact that one usually dies before the other.

I thought they were and agree, it is bizarre.  What gets me is the addition of any gifts (I think over £3k/year) you've given over several years prior to your death.  When you think of the tax you've paid accumulating your savings and buying a property, you are being taxed and taxed again.

[dreampolice]

It could be down to the fact of couples. If I die first and leave everything to my wife, when she dies our daughter will have both mine and my wife’s allowance before the tax comes in.

When my dad died in 1990 my mum inherited his half of their estate. When my mum dies her allowance plus my dads (at whatever the threshold was at the time of his death) will be taken into account on my inheritance, unless he had specifically left me money from his estate at that time.

[geoffr]

Having been through the process relatively recently I can tell you that with the residence nil rate, applicable when leaving the residence to a son, daughter, step-son or step daughter, and any allowance “left over” from a spouse’s nil rate and residence nil rate the total amount that can be tax free is actually considerably higher than £345,000. The amount is actually £1,000,000 before tax becomes payable. Gifts made more than seven years before death are exempt. The HMRC guidance is actually very good, search for IHT.

[Chester PB]

Oct 18, 2024 19:59:36 GMT kate said:

I'm puzzled. There's all this talk about the forthcoming budget probably making changes to inheritance tax and inevitably more people's assets will be liable for it when die.

Now as I have understood it, it applies at present if your total assets are over £345,000.
It has just been said (on TV news) that only 4% of people currently fall into that category.

I find that incredible considering property values in most towns and cities are that or more at present.
So how come it only applies to 4% of the population?

I can only assume property values are not included? And yet I thought they were.
Have I got it all wrong?

The nice people at the BBC news website have anticipated the popular response to this story.

www.bbc.co.uk/news/business-36014533

[peterob]

Oct 18, 2024 19:59:36 GMT kate said:

I'm puzzled. There's all this talk about the forthcoming budget probably making changes to inheritance tax and inevitably more people's assets will be liable for it when die.

Now as I have understood it, it applies at present if your total assets are over £345,000.
It has just been said (on TV news) that only 4% of people currently fall into that category.

I find that incredible considering property values in most towns and cities are that or more at present.
So how come it only applies to 4% of the population?

I can only assume property values are not included? And yet I thought they were.
Have I got it all wrong?

I hadn't realised that they had increased it. It used to be less. They did change the rules such that property explicitly left to a child attracted an additional allowance so that the effective rate per head was something like £500,000.  For married couples there is no inheritance task on assets passed to the surviving partner and the tax allowance is passed also. This, in practice, defers inheritance tax for married couples until the death of the surviving partner.

The really nasty thing about it is that it becomes due often before assets of the deceased can be liquidated and the real cost to the estate is actually greater, especially if the due amount has to be borrowed.

For other than the very wealthy,  inheritance tax is mainly an issue for those that die "competent".  For those that need care in old age the local authority will [by denying care funding] have 100% of everything above some number like £24,000.  Residential care costs upward of £65k a year and it will eat assets such as housing for the majority of people.  There are rules to protect the assets of the surviving partner but I think it gets awkward if a house is owned in common.

[zx9]

Oct 18, 2024 20:16:28 GMT dreampolice said:

It could be down to the fact of couples. If I die first and leave everything to my wife, when she dies our daughter will have both mine and my wife’s allowance before the tax comes in.

When my dad died in 1990 my mum inherited his half of their estate. When my mum dies her allowance plus my dads (at whatever the threshold was at the time of his death) will be taken into account on my inheritance, unless he had specifically left me money from his estate at that time.

^^^ What Nige said above is correct for the family home, other investment properties or rentals (Air B&B business ?) are not included.

The gifts to children has a seven year limit if I recall correctly.

The above was correct as of 2020 when I dealt with my father's estate.

[kate]

Trouble is, I no longer have a husband and have no children so my will is tied up with a half-sister getting most of it, apart from other small legacies. I'm guessing the unused part of hubby's allowance can default to me, which could help matters. I don't want to leave my sister problems!

[geoffr]

Oct 19, 2024 9:23:58 GMT zx9 said:

Oct 18, 2024 20:16:28 GMT dreampolice said:

It could be down to the fact of couples. If I die first and leave everything to my wife, when she dies our daughter will have both mine and my wife’s allowance before the tax comes in.

When my dad died in 1990 my mum inherited his half of their estate. When my mum dies her allowance plus my dads (at whatever the threshold was at the time of his death) will be taken into account on my inheritance, unless he had specifically left me money from his estate at that time.

^^^ What Nige said above is correct for the family home, other investment properties or rentals (Air B&B business ?) are not included.

The gifts to children has a seven year limit if I recall correctly.

The above was correct as of 2020 when I dealt with my father's estate.

Hence the term “Residence Nil Rate” if there is a property in which the deceased did not reside, and the estate is above the threshold, tax would be payable.

[willien]

Oct 19, 2024 9:23:58 GMT zx9 said:

Oct 18, 2024 20:16:28 GMT dreampolice said:

It could be down to the fact of couples. If I die first and leave everything to my wife, when she dies our daughter will have both mine and my wife’s allowance before the tax comes in.

When my dad died in 1990 my mum inherited his half of their estate. When my mum dies her allowance plus my dads (at whatever the threshold was at the time of his death) will be taken into account on my inheritance, unless he had specifically left me money from his estate at that time.

^^^ What Nige said above is correct for the family home, other investment properties or rentals (Air B&B business ?) are not included.

The gifts to children has a seven year limit if I recall correctly.

The above was correct as of 2020 when I dealt with my father's estate.

It looks to me like any gift made 7 plus years before death is tax free, though HMRC approach the issue from the other direction.

Isn't it comforting that we can can give as much as we want to political parties without tax implications?

www.gov.uk/inheritance-tax/gifts

[geoffr]

Oct 18, 2024 21:13:05 GMT Chester PB said:

Oct 18, 2024 19:59:36 GMT kate said:

I'm puzzled. There's all this talk about the forthcoming budget probably making changes to inheritance tax and inevitably more people's assets will be liable for it when die.

Now as I have understood it, it applies at present if your total assets are over £345,000.
It has just been said (on TV news) that only 4% of people currently fall into that category.

I find that incredible considering property values in most towns and cities are that or more at present.
So how come it only applies to 4% of the population?

I can only assume property values are not included? And yet I thought they were.
Have I got it all wrong?

The nice people at the BBC news website have anticipated the popular response to this story.

www.bbc.co.uk/news/business-36014533

The BBC article is very good, as far as it goes, because it’s never that simple and it’s more accurate than what I posted earlier. I got the basic figure wrong, it’s £325,000 not £345,000. What nobody has mentioned is that if the estate is worth over £500,000 the paperwork gets much more complicated, instead of one form there are several.

 I sorted my mother’s estate with help from a retired solicitor. His most useful comment was “if you employ a solicitor to do the work you still have to provide the numbers, you’re just paying them to fill in the form”. Contrary to popular opinion a solicitor is not necessary for either inheritance tax or probate applications. Some people might feel more comfortable using one.

[willien]

I wonder if I am too late to adopt my 40 something nephew.

[willien]

If you "pay a solicitor" to sort out an estate then the solicitor delegates to a Para Legal.
I did with my mother's estate and as well as saving hassle. He saved us a couple of grand on a small estate - most of it had gone on nursing home costs.

[kate]

Oct 19, 2024 10:56:27 GMT willien said:

If you "pay a solicitor" to sort out an estate then the solicitor delegates to a Para Legal.
I did with my mother's estate and as well as saving hassle. He saved us a couple of grand on a small estate - most of it had gone on nursing home costs.

Since I'm on my own, I have lodged my will with a local solicitor and appointed them executor. Just hope the firm is not now totally an estate agent!