Inheritance tax - Help needed

[Jw744]

Good afternoon. I really need some advice. A good friend of mine has recently lost her father after a very short Illness. He did leave a will which states a split between her and her 2 siblings for estate. Now my question is around inheritance tax. Is it based on the overall sum of worth of estate or what each of the people receive individually for them to pay tax on what they individually receive? I am confused as I have read estate and then read the limit of 325,000 per person. Also one of the properties is a main family home where they have previously all lived together and also 2 properties in which siblings live with their children. Please could someone explain how the property tax and tax free residential part would work in relation to the father's property and / or the siblings homes owned by the deceased father. Would they be liable for tax on those too? The other area of concern is that he also owned a property in spain and had a Spanish will which again leaves to the same people. Can a UK solicitor also deal with this or does this mean that tax is liable twice or are there rules to who has to deal with this? Many thanks in advance for the advice.

[AGoodman]

IHT is charged on the estate rather than the heirs.

The basic process is to work out the value of the estate including any substantial gifts made within the 7 years prior to death. It sounds as though there are four potential deductions you can make:

1. Father's nil rate band of £325,000
2. Assuming he was a widower, any remainder of his late wife's nil rand band. If she left everything to him then this may also be £325,000.
3. The residential nil rate band of £125,000
4. Probable transfer of another £125,000 if he was a widower and his home was worth at least £250k.

Items 3 and 4 would be reduced if mother or father's estate were in excess of £2m. Seek advice.

Total possible nil rate band is currently £900k. The estate must pay 40% IHT on the balance but can pay the tax on land by way of 10 annual payments or when the property is sold.

You should get a credit for Spanish tax payable on Spanish property to set against the UK tax. It is UK unilateral relief rather than the result of a treaty.

I've assumed that father was either UK domiciled or deemed domiciled as a result of being UK resident for 15 years.

You should get a UK solicitor but will also need a Spanish lawyer (or possibly notary) to deal with the Spanish property.