IHT calculation

[Loobylou]

Hi
Don’t know much about IHT calculations I’m totally confused.

Need to work out IHT for following

Nil band rate of £325000 used up

£400k house
£300k cash/quoted shares
£100k share in business partnership (over 2 years)
£5k liabilities

Residue to be split between relative (cousin) and charity

Really not sure how to do working out for IHT purposes any help would be greatly received. I have been on HMRC website and I’m just even more confused.

Thanks

[jerome.lane]

Hi, is the residue only going to cousin and charity after IHT paid? If there is a spouse or other beneficiary, then the IHT position will change significantly.

Assuming the estate is just split equally between cousin and charity and that the partnership interest qualifies for business property relief, the net chargeable estate will be £695k. If the split is equal, then only £347,500 is chargeable to IHT as charitable donations are exempt. There should be a reduced rate of 36% IHT as more than 10% of the estate has gone to charity. This gives IHT of £125,100. This isn't a hard and fast computation to be relied upon as there are many differentials that could affect the result including some ugly grossing up computations if there are specific gifts and exempt gifts in the Will.

It would also be prudent to consider the partnership further as it might be that half of an asset qualifying for BPR has been given to a charity who probably won't have any interest in it. It's wasteful to give BPR qualifying assets to charity as they're already exempt from IHT. This can cause issues depending on how the Will is drafted since charities tend to want the biggest slice of the pie even if it isn't tax efficient for the estate.

Our firm offers probate services and would be happy to assist on a professional basis if required. Good luck!