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Where Taxpayers and Advisers Meet

IHT threshold

scientist
Posts:3
Joined:Sun Apr 22, 2018 3:56 pm
IHT threshold

Postby scientist » Sun Apr 22, 2018 4:02 pm

My parents sold their house in Oct 2016. Sadly between exchange and completion, my father died in late Sept 2016. In my fathers will, everything passed to my mother so there was no IHT liability. In Dec 2016, my mother purchased a flat which she still owns.
From what I understand, the basic IHT threshold on my mothers estate is £650,000.
There is also an additional threshold if my mother bequeaths her flat to her direct descendants eg me, my children etc. In this tax year (2018-19), the additional threshold is £125,000 giving a total of £775,000.
Is there also a second additional threshold available for my father which would increase the total to £900,000?
Thanks

TaxAdviser2018
Posts:26
Joined:Tue Apr 17, 2018 1:34 pm

Re: IHT threshold

Postby TaxAdviser2018 » Sun Apr 22, 2018 8:33 pm

As your father died before 6th April 2017, when the Residence Nil Rate Band (RNRB) first became available, his estate would have not used any RNRB. he full RNRB will therefore be available for transfer unless the value of their estate exceeded £2m and the RNRB is tapered away. Therefore in the year ended 2018/2019 the total tax free allowance should be 2 x (325,000 + £125,000) = £900,000.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT threshold

Postby maths » Sun Apr 22, 2018 8:41 pm

Father's beneficial interest in the property will have passed to the purchaser at "exchange" in which case that interest would not have formed part of father's estate for IHT and nor did it pass under father's will to mother.

If rest of father's estate passed to mother then none of father's NRB was utilised and as the RNRB had not been in force at that time father could not have used any part of it.

On mother's death she would thus be entitled to father's NRB plus her own ie total 650K.

The RNRB available to mother on her death will depend upon the numbers involved as it would seem mother has downsized?

scientist
Posts:3
Joined:Sun Apr 22, 2018 3:56 pm

Re: IHT threshold

Postby scientist » Mon Apr 23, 2018 7:56 pm

Thank you to TaxAdviser2018 and maths for your replies.

TaxAdviser2018 - I fully understand your reply.

maths - FYI, the house was sold in Oct 2016 for £440,000. The property purchased in Dec 2016 cost £350,000. If I correctly understand your reply, are you saying that no paternal RNRB is available as my parents "exchanged" on their property prior to my fathers death? If so, is the total on my mothers death ( 2 x NRB ) + ( 1 x RNRB)? eg £775,000 in the current tax year. Or is the total on my mothers death ( 2 x NRB ) + ( 1 x RNRB subject to a downsizing calculation) ?

Unfortunately, you do not agree. It would be appreciated if either of you can share links to websites which support your replies.

I have read "Inheritance Tax: transferring unused tax-free thresholds" and "How downsizing, selling or gifting a home affects the additional Inheritance Tax threshold" on gov.uk. Its still not clear to me.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT threshold

Postby maths » Tue Apr 24, 2018 11:34 am

Based on the figures mother would be entitled to two NRBs and two RNRBs (the downsizing allowance being irrelevant).

scientist
Posts:3
Joined:Sun Apr 22, 2018 3:56 pm

Re: IHT threshold

Postby scientist » Tue Apr 24, 2018 7:09 pm

Thank you maths. Your reply is appreciated


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