Martin Lewis: Inheritance tax will you pay it? A quick myth-buster to explain how it really works
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- Опубликовано: 11 янв 2024
- A quick myth-buster to explain how the much confused tax really works, who’s likely to pay, and who isn’t…
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Nowadays I think the bigger concern is losing your estate to care home fees.
What do you suggest, stay home and live in your own excrement 😂
It broke my grandmothers heart to know that the care home she was in was costing £1300 a week, she was in there for 2 years. She wanted this to be her children's inheritance
@@bensims7501A nurse at home wouldn't cost £5000 a month.
@laurainsley2907 yeap, but they (carers, not nurses) work 8 hour shifts. she needed 2 people to lift her that's 6 people a day
No! Mucky as that sounds! I think you can set up a trust fund which remains out of reach of the Local Authority , and the money can be left to your beneficiaries, who will top up any fees in the event that the state accommodation is ...er...full ofexcrement to use your description!!@@Bikeaddict4235
Inheritance tax can be a source of confusion, with various myths surrounding who will pay it and how it truly works. Contrary to common belief, not everyone is subject to inheritance tax in every situation
Understanding the intricacies is crucial, as the tax depends on factors like the value of the estate, the relationship to the deceased, and available exemptions. Dispelling these myths is the first step in demystifying inheritance tax.
Having recently dealt with the complexities of inheritance tax, I can attest to the importance of professional guidance. It's not just about the financial aspect but understanding the nuances of tax laws. I engaged a certified advisor who not only clarified the intricacies but also helped optimize the financial implications, ensuring I paid only what was necessary.
Your experience echoes my concerns about potential inheritance tax. Could you share more about your advisor's approach and how they helped you navigate the intricacies of this tax?
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Retirement took a toll on my finances, but with my involvement in the digital market, 27thousand weekly returns has been life changing.
The bigger concern is if you need care and own your home the council will take your home, you’ll have nothing to leave. This is what most pensioners like myself are concerned about.
Why would the council take your home if you need care? Curious.
@@shamir.globalimpact Think he means, if they're put into a care home, and they own a house, Government will use the value of the house to fund the stay at a care home, at apparently high rates. You only get help from the system, if you financially have nothing.
That in itself controversial. One one hand, people who have nothing need help from Government, but if they contributed nothing or little into the system why are they getting too much help?
Those who contributed to the system can't get access because they have their own finances, but at the same time, why shouldn't get access, when it's their taxes that prop up the system in the first place and now they need some help back.
@@MrGts92Ah ok understood. If that is the reality, that's actually horrible.
Brilliant summary. Anyone asks me about IHT, I’m going to point them to this video.
You may want to point them to the 'capital gains video' first. ....
Why would anyone ask you about IHT before googling it themselves?🤣🤣
God forbid you point them to a professional advisor who has qualifications, does it for a living and has spent their career advising people.
@@andrewcarter7503 That gets expensive, and in the internet age self-education is possible, but must be done thoroughly, consulting several sources. If it's a complex case, then yes, professional advice will be required
Such a brilliant video explaining simply.Been looking on internet & a little confused. the way things were worded.Martyn has summed it up so well.Thank you
Sounds like a tax on single people to be honest.
It's not a tax on the person dying, it's a tax on people receiving unearned income.
I recently inherited almost $500k. I REALLY need to make this money work for me, and not just disappear over time. I've been scrambling for somewhere to put the money, where can make an effort to use the gains to pay bills so I can quit my job. All roads have pointed to the financial market of some sort which is a good idea buh where else should I put money besides the financial market? We have a 13% RPI rate so cash is tough.
Amazing well done! Which companies have performed best for you?
I'd say your lA is doing a great job protecting your portfolio. More still impressive as you're making fortunes in these turbulent times!
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Regardless of whether or not he outperforms i will always stay invested as his methods alone with keeping investors in touch with their strategies and outlooks are something that so few managers are capable of and they should follow suit
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I also found his impressive resume on Google. It feels like a blessing to have come across this comment section.
That’s the first time I have heard anyone explain the situation about each partner having a double allowance. Thank you.
Excellent summary, thanks Martin.
Point 6. Whilst only 4% of households pay inheritance tax, many many more have to complete bonkers hrmc forms to prove no tax is due. If you ask a solicitor to do it for you it will cost around £10,000. If not you get to fill in around 80 pages across 13 forms. It is a bureaucrats wet dream and very time consuming.
But think of the £700k you will receive for your 5 hours work!
I agree. It is just 'another' government endorsed hurdle and hmrc financial gain put in place of your 'rightful' inheritance that they have already charged tax on when it was 'originally' either earnt or purchased. And now they want more!.
@@yesihavereadityou mean the 700k avoid paying? With that logic you should be happy to pay up to some 690k to prove you shouldnt pay
Thank you Mr Lewis
For what?
At last a clear explanation on inheritance tax! As ever thank you Martin Lewis!
The main problem I have with it is that the wealthiest almost entirely avoid it via complex financial vehicles/offshoring etc. Yes, only 4% of estates pay it today, but that number will go up substantially every year as house prices continue to rise and the tax thresholds are frozen.
Taxing twice at 40%, even for affluent households, is imo too heavy a burden, but if you’re going to do it, at least make the very wealthiest pay it as well. Not to do so is a huge injustice.
Yes and in the case where a spinster aunt died leaving everything to her sister, who had died previous. With My brother and sister we inherited her estate, it came over the £325 K threshold so 40% IHT was charged which just left me asking why.
Her earnings were taxed, her taxes money invested and profits taxed, taxes when property bought, and then they want a further piece of the action.
@@guyr7351 The tax is on you.
You are looking to come into a sum of wealth that you didn't earn.
Unearned income is still income.
Unearned income is taxed below the level of earned income.
Stop complaining.
You received a bunch of cash you did not earn.
Pay your tax and count yourself lucky.
Luckier than most.
Why should you be able to accumulate so much intergenerational wealth when to do so invariably disadvantages everyone else?
@@bakedbean37 one way to look at it, to me it is the state having another bite at the cherry. I’m not sure how it disadvantages other people though, the amount of tax raised is modest by the Governments income levels from other taxes, and as others have said those estates that are much higher valued systems and ways are found to pass the wealth down.
I did use the money wisely and it was not money I had ever anticipated, but I had promised my mother when she was dying of Cancer I would make sure her sister was OK a promise I kept, being the only person who made the effort to see her in her final days, (covid was still having an impact) talking to her as she slipped away. I also made a payment to a cousin who I know my aunt wanted to give money to, the other beneficiaries wouldn’t make any payment. But hey ho it is what it is
@@bakedbean37 Because it was her aunt's money. Like it or not: family looks out for family. The tax has been paid. You, my friend, should not have a say.
@@Nora.........earn your own money don't rely on handouts. These rich scroungers are insufferable! Take the money and keep quite. Many people are struggling to feed themselves and their kids, they don't want hear about people complaining they missed out on 100K and only got 500k in inheritance.
Ive just had a free chat with advisor Clare Sutherland and she has answered all my questions, especially about lasting power of attorney, IHT, wills and if a trust fund would help. Trust funds can be very expensive. Everyone's situation is different so I think speaking to a professional has helped me understand how I can protect and make it more straight forward for my children to pick up the pieces if I lose capacity and when Ive gone.
I’m never likely to have enough for inheritance tax to be applied to my estate, but I still think it’s a despicable tax.
We pay tax on everything all our lives, so why should stuff we’ve bought or money we’ve saved, that we’ve already paid tax on, be taxed again on our death.
This was a tax originally aimed at the super rich, now to be honest it affects the moderately wealthy, it shouldn’t be applied to anyone, but if the government must steal money, maybe they could reign it in a bit & only charge 20%.
Very succinct summary, thanks Martin!
You didn't mention that pension pots do not count towards your estate value on death so its a very cost effective way to leave a large sum of money.
Private pensions can "sometimes" be included which I why, I suspect, Martin didn't stress this. If you have a flexible pension (like a SIPP) and reduce your drawings because you know that you are terminally ill, in a bid to pass on wealth, HMRC can charge the pension to IHT. In any event, if you die older than 75 and leave a pension fund to anyone (spouse, children or grandchildren) they pay income tax on what they take out of the inherited pot which could be 20%, 40% or 45% so could be more than IHT albeit the tax is on withdrawals whereas IHT is before it's passed on.
@@mikeowen1819 once they reach 75 years of age that's it.
@@sickbuffalo9902 what do you mean?
People who never saved are better looked after as they can get pension credit and other benefits. People who worked all their lives and saved by being frugal are punished. My pension is very small and every month I have to dip into my meagre savings after working and paying taxes for 45 years. My pension is just over the threshold for claiming pension credit. I am single and there is no one to share the bills. No one knows how long they have got on this planet but my thinking now is enjoy life by spending your savings and if you live long enough without any savings left, then let the government / council take care of you. People with no savings or assets pay nothing for being in a home but others with some assets have to pay.
It’s bonkers that this is a vote pleaser when so few people pay IHT. The RNRB needs reform though so siblings are included and not just direct descendants.
Needs reform. There should be a higher amount/allowance for those in London as properties are the highest than the rest of
UK. All London homes are all above £325k. So all single home owners will have to pay. What is the point of owning a property, be poor & live on benefits!!!
@@venuslin8647 there definitely should increase the allowance across the board, not just London. I’d rather own than rent tbh.
My mother who was divorced from my deceased father has a pretty regular family house worth more than £500,000. She has 3 children and 3 grandchildren. So I'm going to be paying 40% tax on maybe a little over £100,000 of the money I receive, meanwhile Cuthbert who is an only child of a wealthy couple can pick up £1,000,000 tax free. Its that kind of inequality that needs to go. Also the Duke of Westminster inherited £8billion without paying any tax as his family set up a trust fund. Its a silly tax that only catches a few people in the middle.
It’s an unjust Tax, people work hard all their life’s and get taxed on money earned, money spent and even money saved. Other countries have abolished it completely. The Tax system is complicated too much as it is. So is this the whole U.K.? I thought it was £350k per person and £700k using a dead partners like a husband or wife’s Allowance. Didn’t know if you pass on a house it goes up to £500k.
@@mrscreamer379Or instead of being upset at someone getting a better deal maybe because his parents had a business who employed people for many years ha it so go we abolish it and everyone is on the same playing field. So the rich who have worked hard should give it up that’s a problem too why should they.
The biggest scandal around inheritance tax is HMRC demanding payment directly, but you can't pay untill Probate is granted which is in the hands of another branch of the burocracy that is even more dysfunctional than HMRC.
You’re given 6 months to pay it.
Probate is quick if there is a valid Will in place.
Was told recently probate is averaging 9 - 12 months since covid...
Only 4% of people pay the tax. They'll be rich people. Fuck em .
Surely as house prices keep rising more and more people will be subject to it
I am not rich, but my estate will attract IHT. Single people, usually divorcees, owning a home in the South East will be caught every time!
I'm the same as you, single divorced but house around £700K, the going rate for a modest family home in SE. When my son is ready to buy a house I will downsize to pass the extra £200K on as soon as possible. I have zero savings.... I stuff it all into the pension pot, an amazing protective barrier from IHT.
Also worth noting, and this is important, that money in the deceased person’s pension falls outside of the estate for IHT considerations!
not always... but usually.
This is precise and concise summay, thank you. May be you can do another one on Capital Gains Tax!
Can you sell the property ahead of probate… would it still count? Or must a physical property still exist at the the time of death to get the extra tax allowance?
Estates over £2m do get RNRB but it’s tapered away by £1 for every £2 over the £2m the estate is.
One checkpoint as not sure 500k on residence is correct, it’s up to 500k as residence value is the tax free amount so if you left 500k in cash and residence was 100k tax free would be 425k the rest would be taxed still.
thanks so much for this.
My Dad had me a little late and he should be retired but the economy won’t let him.
What would be the best route, Stock,a business or what.
I’m Australian and didn’t know how this tax worked but and it’s occasionally suggested we will get it here. If it is and it’s similar I don’t have a problem with it after your explanation.
What I do find very strange is that I always thought it was a tax paid by the recipient, however the way you talk about it, it’s paid by the deceased. Personally, I think that is gross. It would be more acceptable if it was calculated on the deceased’s assets etc. But the tax imposed on the recipient.
Brilliant Martin xx
With house prices now and inflation, it think it will become more of an issue for current middle earners. Its a popular policy to reduce it for the simple reason it is a tax on a tax, any wealth generated will have tax paid on it from the start. It is not a `let the wealthy keep more money` policy to reduce IHT, but of course it will have no bearing on the poorest, who just need more money in their pocket today
Thank you!
I applied to HMRC/DWP regarding the married couples when my dad died in 2003 about my mum on less pension than my dad I watched your programme in 2022 & im still waiting 16-18 months ago
Thank you 👍
Is that 1m for main residence or can that be split between other properties too included in ur estate
how about capital gains? if we inherit property from a parent then sell property on?
These issues are mind boggling, especially if you are not financially minded, or savvy. The whole death thing, and how to negotiate this mine field, frankly terrifies me.
Thank you! Do you have to do anything to pass on/transfer the allowance from my partner to myself?
When you die your personal representatives will have to report your assets and establish if any IHT is due. If they can demonstrate that there is an inter-spouse or inter-civil partner transfer and no IHT is due then it passes tax-free. When the second dies, their personal representatives have to demonstrate why they believe that the second to die also inherited IHT exemptions from their first-deceased partner.
How are remaining pension funds impacted by the Inheritance Tax?
Great video but . i don't have a wife or children to leave it to so have left it to my brother and his son .. will they be ok .. thanks ..
Is there a time limit in which you can use both parents IHT & Residence Nil Rate band? I have been told 10 years from the death of the first parent. Would like some clarification please.
Can you make video on divides please because it changes this year 😊
Hi
at 2.06-2.07 in the video, you said £350000 goes up to £500000. Did you mean £325000 goes up to £500000?
What gets me is i have been living with my partner for 20 years, i have worked 33 years and recently i was out of a job redundancy and i could not claim for anything no benifits even for dentists doctors etc because my partner was earning more than £16 grand a year, so you get nothing if your not married and get nothing when they pass (if they go before you do)
Get married?
I have some good friends who have been together since University 30 years+. When they reached the point where they could afford to buy they got married because it improved their tax situation.
Yes i understand that, but the government treat me as a couple living together now. But don't if he passes before me.@@IMBlakeley
And that is why you can't take it with you...the tax man grabs it!
If the money or assets were gifted prior to death, is the tax still imposed?
So im divorced next to no savings and just my house which is probably worth 430k to leave to my 3 children.. does that mean they will not have to pay inheritance tax?
So when second parent passes then IHT is paid at 40% on anything over £1 mill assuming they have passed the property over to their offspring (explicitly stated in a will for example).
Yes and assuming no lifetime gifts within 7 years that would eat into the nil rate band.
no it's 40% on anything over 325k or 500k if it's left to children
So essentially, when I die (and we all will some day 😮), at the moment I'm guaranteed up to £500,00 worth of assets, and my benefices DON'T pay ANY tax at all ❤? I'd appreciate clarification, please 😅.
Many thanks Mr Lewis for this video 📹
Assuming your assets include a home worth at least £175,000, then you won't pay any Inheritance Tax. If you home is worth less than this, the amount you can leave will fall in line with the amount that the home in worth.
unless you traded down from a home previously worth more than £175k but this is a very niche technical point but does allow some to trade down from a larger property and not lose out@@tlangdon12
My Mother is going into a care home and the house she and my deceased Dad bought is to be sold off, her savings account emptied and used to pay for her £1200 per week care.
£130,000 worth at the moment. Sadly, that's how it goes, the money my Mum and Dad created over 60 years is going to the nursing home manager. Someone has to pay for it!
Looks like myself, my brother and sister are getting no inheritance at all. What a wonderful country. 😞😡
A friend of mine whose mother was living in.a Council House was able to leave her Council house worth 6 million to her grandson. Is there any inheritance tax on such a transfer?
When my dad died several years ago. Died from sudden death my parents were not married. I was 8 The government took 40% of everything!! It went to probate and the solicitor charged £300 per hour letter / email 😢
You could take out a Whole of Life insurance policy (written in trust) to cover the liability and as long as the premiums are from normal expenditure or below the £3,000 annual gift allowance, then this will protect the estate. Or you could invest in funds that attract business relief. Or you could spend it.
The amount of column inches dedicated to getting people worked up over a tax that objectively speaking only the wealthiest actually pay is obscene.
Martin, I LOVE you & your videos! The tax system is really unfair in this country, especially for a lot of Lower/Middle class British people. Have you heard of a RUclipsr called,"Gary Economics?". Please search him out as he is on a public quest to try and change some of the ways people are taxed in this country. You both could be a force to reckon with! ❤
I always have this question: we have our residence, and buy stock while alive, to try and get an income with our money. If we die and the stock goes to our child, do they pay inheritance tax on that? even if I worked 30 years to accumulate that?
It's an unfair tax (assuming that your income was earned legally). It should be abolished.
A lot of income and growth could be in untaxed isas
1. Isas have limits and all your money should be spread out and not in only 1 thing.
2. Cash isas are covered by the fscs so only 80k in insured if the bank goes bust
3. Idk if I pass and leave the isa to my child if they actually get the isa, or the money is taken out and then used as inheritance
4. If the royal family was exempt, everyone should. Any law that is for some only is an unfair law that should not exist
Have to pay tax. Part of your estate.
Can you please tell me if I was to pay my children's rent or bills,or shopping on a regular basis would this be a tax problem for them on my death or is this OK because I am not paying money directly to my children
How about if you make children shareholders in Ltd company so they inherit the company? (Either before or after passing)
Martin you’re a whizz and so helpful .i have are on property can I give that to my daughter now I’m 78 and if I’m lucky enough to survive 7 years there’s no tax to pay or will I have to pay tax now on gifting it to her . She’s not uk resident , lives in Australia ?
you can't continue to live in the property without paying rent if you wish to give it away and for it not to be included in your Estate. And you have to live for 7 years anyway. And your daughter might have to pay tax in Australia. If she lived in the UK she'd have to pay capital gains tax on the increase in value between the time you gave it away and the value when she sold it. And she'd have to declare the rental income you'd have to pay to make the gift work.. and you'd have to pay the rent out of taxed income and it would become taxable income in your daughter's hands. Not a wise move...
Thank you Mike I’m having trouble understanding your reply but I really appreciate you try to help me . I just can’t grasp all you’ve stated . So you think ist better I just leave it all in my will as I have done already . Big thanks for your help again. Bob
When my father died 27 years ago the inheritance tax allowance was not used as everything was passed to his wife my mum.
So would the tax allowance for my father from 27 years ago before at the rate that was in use at the time of his death or is it at the new rate of £500,000. As it is now plus the £500,000. For tax exemption as all proceeds will be going to her three children and six Grandchildren
Thanks for this, it is very clear. It would be better to decrease tax on work - ie income tax which is paid by virtually everyone - by either increasing non taxable allowance (which has been frozen for years and years by this tory government and means more and more people, even those on modest incomes and pensions, ipaying more tax (called “fiscal drag”), than reduce or even abolish inheritance tax which only effects a tiny percentage of the very wealthiest in the UK. Crazy that work is taxed more than wealth……working people spend their money in UK and this stimulates economy, very wealthy people tend to squirrel away windfalls like inheritance tax (usually abroad in tax havens).
the argument against this is that often capital assets have already been accumulated from taxed sources so IHT is a second tax on the same money.
@@mikeowen1819but it's a crap argument.
Most inheritance is just asset price inflation over time which may have originally been bought with taxed income but hasn't been taxed since.
The only problem with IHT is it has too many loopholes (trusts mainly...).
Are pensions included?
Unfortunately with inflation, especially house price inflation, many people find themselves caught out by IHT unexpectedly. Giving from spare income is the most efficient - and underused- means of reducing IHT liability. Keeping records is helpful; form IHT 403 contains a simple layout for this
Worth mentioning. If you have a pension pot then that is not considered an IHT eligible asset. So, if you have £900,000 in assets, and you have a pension pot of £200,000 then the pension pot does not take you over the £1,000,000 threshold. You will not pay any IHT.
Yup no inheritance tax to pay, sell the house you got and get stung for capital gains tax never win, so sickening
Except there's no CGT if it's been your main residence throughout the period you have owned it.
I dated an heiress when I was younger. Her father had everything owned by his companies and the children were all directors. 😅
Does the first partner have to formally declare their inheritance allowance transfer to their surviving partner to the HMRC or is it automatic
Fair to say that atm only ~4% pay the tax. What we have though is a boomer generation that is coming to the stage in life where there are more popping off. This generation more than any have benefitted from increased asset values much of which is still stored in investments and property. That 4% is going to rise significantly in the next 10-15years. I doubt the govt is going to want to throw that out. What I expect to see is a raising of the threshold to ~425k for cash & 750k inc property.
I think you're spot on with this. My brother and I fall into this category because our Dad saved his hard earned money, but mainly due to property price rises. The house we will inherit is a 4 bed detached and by no means grand but worth around £750k currently. With property prices as they are, it's hard to think only 4% will pay going forward. There are ways such as inheritance tax isa's you can invest in that avoid the tax because they invest funds in small businesses.
Good point. The future is a foreign country though. Property value has certainly accelerated rapidly but so has the time folk live with chronic conditions. I can see a situation where very many ordinary houses in the South East go above all thresholds, yet have been effectively been mortgaged to pay for Care. My Mum died recently at 96 and a close relative is still living in Care at 103. It all gets complicated.
Can you please help me locate my estate I have inherited.
Is my private pension pot included in my estate for inheritance tax purposes or is it exempt please ?
I understand that a SIPP (UK) is exempt.
Only if its transferred into another pension.
Good explanation with one key confusion. Martin uses the word “you” a lot. But, in this case, the “you” will now be dead. So, key clarification is that the executor / administrator has to do the paying of the tax if required.
More people will pay this tax if they live on their own. (Wealth they have already paid tax on). It is taxed at a marginal rate of 40% which is twice as much as CGT.
I have a question my parents are not married but my dad if he passes said he’d leave his 450k house to me does that mean I have to pay the same amount of money he paid for his house or could I just move in there and pay the monthly costs of what it costs to live there just wondering ?
I noticed the comments are turned off in your latest video “what the energy price cap drop and standing charge raise” so I’ll comment here.. I’ve run out of things to say on the matter so I’ll say this as my last words
I haven’t been able to pay an energy bill since July last year. I haven’t used any heating for 6 years and last year including this I stopped using washing machines or taking a showerI can’t afford the water bills. It’s a quick way in a sink -lm still clean and smell pretty good. I rarely wash up as I can’t afford to buy food. I haven’t had a cooked meal since Christmas Day which was a special occasion. I had cheese on toast. As of now I have zero money overwhelming debt and just a pepper grinder some cooking oil and a half used frenchies mustard tub. I haven’t eaten for 2 days and counting so of right now I no longer care what the energy companies do it wouldn’t make a difference. But hey on a happier note the sun is out and I can hear the birds and now I am at peace with the world.
Should IHT be abolished? Yes - but at the next budget, Hunt should give priority to tackling 'fiscal drag'.
For everyone here complaining about IHT...
The tax take overall need to be the same total number. Which leaves two options:
1) Pay more tax (income, dividend, capital gains, VAT, VED, duties etc.) while you are alive
Or
2) Pay inheritance tax on your estate when you're gone.
Be careful what you wish for.
Hey Martin, I just watched your video and I must say that it was really informative and well-made. I was wondering if I could help you edit your highly engaging videos and thumbnails which will help your video to reach to a wider audience and increase your subscribers and viewers.
How do I persuade my parents to take advantage of the seven year rule by signing over the house to me and go and live in the shed?
People are doing this left right and centre, and if its done wrongly, its not fooling anyone. They still come after it - whipping out the paperwork to say "but I have this that says they dont own it!" doesn't work if they're still living in it rent free - they're still classed as a beneficial owners for the purposes of assessing assets for care home fees. Look up deliberate deprivation of assets - basically trying to hide an asset to get more out of the system.
It also simultaneously screws over the people who the house gets "signed" over to. If they still have them, they'll lose their first time buyer status, and theyll also get classed as owning multiple properties, so the "main residence" like martin alludes to, doesnt apply. If the person who now "owns" the house needs care before the parents do - this does happen - then the parents are homeless in this respect too.
Hi... would i still have to pay IHT
If i buy my son a house under £325.000 put it on his name.
Thank you..
No one would dream of taking out their own appendix after watching a RUclips video on how to do it.
But people think watching a RUclips video on IHT equips them to do their own tax planning.
It’s a tax that needs to be abolished. It’s not the most affluent house holds who pay it! Example when the Duke of Westminster Died and his son inherited his estate the inheritance would have run into the billions he paid nothing of the sort.
Very unfair. Penalised for not being able to have children - discrimination. So when I pass on to my nephew then it's taxed.
What would happen in this scenario? Mother is due to inherit part of a 1.2 million estate, currently the estate is split three ways. Mother is terminally ill, is she dies 4 children are due to inherit her estate. Would each child get the relief or is it taxed at source? ie, the 1.2 million would be taxed and then divided?
Assuming no addition relief from Mother's husband etc, she would have £500k nil rate (£325k + £175k), which leaves a balance of £700k. 40% IHT due on £700k, irrespective as to how many children are beneficiaries from the estate. I think that was the main question.
@@trebor70 Thanks, unfortunately husband dies quite some time ago. Thanks for the info, much clearer now!
@@trebor70 could you please help clarify my position for me please.. So im divorced next to no savings and just my house which is probably worth 430k to leave to my 3 children.. does that mean they will not have to pay inheritance tax?
@@montyloads I believe that's correct. The current UK allowance is £325k, but you can pass on property to children/grandchildren and gain the additional allowance of £175k, totalling £500k, as I mentioned earlier. So IHT only due on anything above that figure
@@hoojchoons2258 I'm unaware of a time limit of the passing on of IHT allowances. If her husband's allowance was unused (£325k plus £175k, or £150k prior to April 2020), and his entire estate was passed to your mother, then it maybe that she has that allowance too. Definitely one to look into with a professional, as it could be up to £200k extra IHT due (40% of his £500k allowance)
Maybe 96% of estates didn't pay Inheritance Tax, but that is because a lot of those have jumped through all the hoops in the preceeding years to ensure they didn't pay.
It can easily creep up on you: a sadly widowed middle-aged person who thinks they've still no concerns about IHT can soon be thrown into problems if a parent leaves them their estate and it's worth a surprisingly large amount. £1m is not as much as it first seems once you factor in your own home AND an inherited home.
Is it true that if someone has a house worth 327 thousand pounds and leaves it to their 3rd child only in their will, will their be any inheretence tax? or does the 500k threshold for leaving to childeren take effect and mean no inheritance tax is owed even though only one of the 3 childeren inherited the house? sorry I'm new to this I just wanna make sure I understand this
What if you go to a nursing home?
What about widows and widowers?
How do we get rid of the inheritance tax that’s what we need to know, what do Americans do?
Not if you syphon the money through your duchy of cornwall business after your mother dies. Allegedly....
When my single parent mother bought the house it was under 100k and now looking at houses on my road for sale over recent years, its over 500k and looks like it will keep rising. It's my main residence. But that means I will need to pay inheritance tax and its not like we are wealthy. Surely a lot more people in London will be hit with IHT as low - average wage workers?
Londoner here. A lot of houses in London are affected. I've had to do IHT planning with a tax advisor as my parents own two houses both worth over a million. They bought one for about £80k and the second for £160k. London property has been insane.
@@stephen129 incredibly! My mother is with ill health now so I don't think gifting will amount to lowering the tax at this point but who knows. It was something I knew about years ago but I was much younger then and broaching the subject would have been difficult and it quite difficult now too. Much easier with my dad who was more pragmatic about things even when he passed. Sigh, adulting.
I could only afford a one bed flat in London on a low wage. Bought my 1 bed flat 40yrs ago. Can't afford to gift anything then or now retired. I can't afford to put heating now! Nil IHT if gifting 7 years before you die is ridiculous unless you are wealthy. As if we know when we are going to die?
If you inherit the house, you won’t pay IHT on the first £500k.
@@WalkWithWallace I know, but 40% of over that and houses around me are 545k- 575k and rising will cripple me as a single person on an average wage especially considering our house was like 82k when we bought it and its been our home since. for the average Londoner in this situation its quite worrying.
Brilliant.
Excuse my ignorance, no inheritance tax for most estates, but equally important...
Will the heirs pay income tax on their inheritance is still baffling.
What about the government taking your estate to pay for care costs
I can't agree that it only hits a certain elite groups. My late father worked on the tools all his life, working class through and through. Because he had been prudent as a young man he had managed to retire to a nice detached two bed cottage in Kent just outside London.
After he passed I had to pay IHT and saw nearly half the inheritance, that my father had worked hard to setup and pay tax on in the first place, disappear overnight. It's a nasty, pernicious tax that must hit almost any estate leaving a property in the SE and other high value property areas of the UK. Good riddance if it does go is all I can say.
*caveat to my rant: this was about eight years ago now and I think the thresholds and application may have changed since then. However I still maintain it's a nasty tax.
Your father was in the 7% mentioned then. Just because he worked with his hands doesn't mean he wasn't wealthy.
It’s truly a Marxist tax inspired entirely from dogma and jealousy, so yes, evil. It raises very little money for the government. We do not live in a communist society, as far as I know, but DEI is making me question that.
You didnt pay any IHT, your farthers estate did.
Inheritance tax is built on a quaint ye olde structure of married couple, children and house worth not so much. Basically not reality of todays world. The weaknesses are around family structure and house prices. You don't need to be super wealthy to pay IHT just unlucky with family structure and location.
The problem is its not a fair tax. Why? In the financial advice industry it's nicknamed 'the voluntary tax'. Because with the right financial advice you can largely avoid this tax. Therefore the very wealthy usually do. They know its coming and have the wealth to be able to plan for it whilst having money on tap for the here and now. It tends to be the middle classes that get stung for this tax. Those who have looked after their savings, invested a bit of money, and have seen the value of their properties go up dramatically over the years. The left like to point to the numbers that very few pay this tax and can't understand why people hate it so much. But this just shows a lack of understanding that we are a very moral bunch in the UK and whilst we are gonna get dragged into it or not we think it's wrong to get taxed again on money which has already been taxed to high heaven.
But the huge gain potentially made in property value, say family home, house, hasn't been taxed before. Buy house for 100k , 30 years later it's worth 600k, none of that money has been taxed.
It's not that wealthy can avoid it, it's that they take advice and many middle-class individuals don't take the right advice. It's really easy to take sensible steps and avoid silly pitfalls. I was a financial adviser for over 30 years and this was bread-and-butter. Most people imagine that they can give their property to their children to avoid IHT while still living in their house. They don't want to give away capital in their lifetime in case they need it. You can't have it both ways... Keep it and pay the tax, or give it away. OR, take out insurance equal to the inheritance tax bill, write that in trust for your family and then keep your capital. So many options...
@@friendlyhorseuk7220 yet the house has the same utility as when it was purchased, so has it really gone up in value if equivalent shelter has the same value? Should all that value be taxed now? Why don't you advocate capital gains tax on housing then, instead of this unfair death tax?
@@adamp6320 capital gains tax is already charged on gains made on houses that aren't a persons main home . I think IHT exempt allowances are generous already at 325k + potentially an extra 175k on a home so up to 500k tax free. Also I don't accept the term death tax, . Dead people don't and can't pay tax. The tax is paid by the beneficiaries , not the deceased
It's not expensive to get IHT advice and follow-up if your financial affairs are simple.
Ordinary unmarried people owning a house and with no children can easily end up with estates liable for IHT- no allowances for them except the basic £325k
Single homeowners with no children are hit with inheritance tax if you live down south and have even a modest sized home.
The inheritance tax should be at least increased so that nothing is paid up to a million and you should be able to leave to any blood relative.
If its raining outside you can take an umbrella with you.
Be careful if you plan on getting married just to avoid paying IHT ..I know far more people lost everything in a nasty divorce
than I know who have lost money paying inheritance tax
It is only spouse / civil partner who is domiciled in the U.K., that is exempt, otherwise it is £325k. Why Rishi Sunak talked of abolishing, not for the Tory blue rinse set.