Inheritance Tax and the law
#1
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Joined: Jun 2011
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Inheritance Tax and the law
I have been living in Australia for nearly 30yrs and seriously looking at moving back to support my elderly father. My mum died last year and he is struggling. I am a single mum with twin 12yr old boys. Before I get international advice I thought I would post this to see if anyone had similar issues or queries.
My thought is to sell in Sydney and Dad sell his place in Windsor. 50% of his property to be invested in a property with me. His other 50% to be invested in an investment property and rented out. This half would effectively be my brothers share (as my Dad would say). The benefit of sharing is my boys would get to know their grandfather and I would be able to support him when he really needs it.
What happens when he dies? Would I have to sell the home with him to pay for the inheritance tax? Because it’s a primary residence would he be better off investing all his proceeds into a home to minimise the tax? In addition, would any wealth I have built up overseas after all this time, be subject to inheritance tax and the UK government just take their share unfairly therefore effectively taking 40% of my children’s inheritance?
Don’t expect anyone to know but thoughts are grateful. Thanks
My thought is to sell in Sydney and Dad sell his place in Windsor. 50% of his property to be invested in a property with me. His other 50% to be invested in an investment property and rented out. This half would effectively be my brothers share (as my Dad would say). The benefit of sharing is my boys would get to know their grandfather and I would be able to support him when he really needs it.
What happens when he dies? Would I have to sell the home with him to pay for the inheritance tax? Because it’s a primary residence would he be better off investing all his proceeds into a home to minimise the tax? In addition, would any wealth I have built up overseas after all this time, be subject to inheritance tax and the UK government just take their share unfairly therefore effectively taking 40% of my children’s inheritance?
Don’t expect anyone to know but thoughts are grateful. Thanks
Last edited by Kath_143; Apr 19th 2018 at 10:48 am.
#2
Re: Inheritance Tax and the law
I have been living in Australia for nearly 30yrs and seriously looking at moving back to support my elderly father. My mum died last year and he is struggling. I am a single mum with twin 12yr old boys. Before I get international advice I thought I would post this to see if anyone had similar issues or queries.
My thought is to sell in Sydney and Dad sell his place in Windsor. 50% of his property to be invested in a property with me. His other 50% to be invested in an investment property and rented out. This half would effectively be my brothers share (as my Dad would say). The benefit of sharing is my boys would get to know their grandfather and I would be able to support him when he really needs it.
What happens when he dies? Would I have to sell the home with him to pay for the inheritance tax? Because it’s a primary residence would he be better off investing all his proceeds into a home to minimise the tax? In addition, would any wealth I have built up overseas after all this time, be subject to inheritance tax and the UK government just take their share unfairly therefore effectively taking 40% of my children’s inheritance?
Don’t expect anyone to know but thoughts are grateful. Thanks
My thought is to sell in Sydney and Dad sell his place in Windsor. 50% of his property to be invested in a property with me. His other 50% to be invested in an investment property and rented out. This half would effectively be my brothers share (as my Dad would say). The benefit of sharing is my boys would get to know their grandfather and I would be able to support him when he really needs it.
What happens when he dies? Would I have to sell the home with him to pay for the inheritance tax? Because it’s a primary residence would he be better off investing all his proceeds into a home to minimise the tax? In addition, would any wealth I have built up overseas after all this time, be subject to inheritance tax and the UK government just take their share unfairly therefore effectively taking 40% of my children’s inheritance?
Don’t expect anyone to know but thoughts are grateful. Thanks
How much dosh are we talking about in your instance?
#3
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Joined: Jun 2011
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Re: Inheritance Tax and the law
His 50% equates to £500k into joint property with me and I will add to that £700k so it won’t be quite 50/50. The other 50% for my brother would need to be invested somehow without attracting inheritance tax (7yr gift is too late -85yrs old now). Also interested to know if my accumulation is also subject to IT if I move back to the UK even though it has been built up overseas. The www.gov.uk website is not the easiet read!
#4
Re: Inheritance Tax and the law
His 50% equates to £500k into joint property with me and I will add to that £700k so it won’t be quite 50/50. The other 50% for my brother would need to be invested somehow without attracting inheritance tax (7yr gift is too late -85yrs old now). Also interested to know if my accumulation is also subject to IT if I move back to the UK even though it has been built up overseas. The www.gov.uk website is not the easiet read!
It appears that your father has assets of ~£1m. If he puts half of that into a property (jointly owned by yourself) a good chunk of that would be exempt if the property is his primary residence and left to you in his will. https://www.gov.uk/government/public...-nil-rate-band so if he has "inherited" his wife's nil rate £325,000 (i.e. £650,000 nil band in total) the IHT on his estate would be non-zero, but, I would argue, manageable.
#5
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Re: Inheritance Tax and the law
Would it not be prudent to get competent legal advice ? With this sort of money around I would suggest it might be wise.
#6
Re: Inheritance Tax and the law
The inheritance threshold is being raised gradually to £1,000,000 for a couple (£500,000 each). One spouse will inherit the other's threshold if they predecease them so your father will receive your mother's allowance. If your father lives until April 2020 then providing his estate is £1,000,000 or less then no inheritance tax is payable. If he dies before this date then only what is above the current limit will be subject to IHT, not the whole amount.
#7
Re: Inheritance Tax and the law
His 50% equates to £500k into joint property with me and I will add to that £700k so it won’t be quite 50/50. The other 50% for my brother would need to be invested somehow without attracting inheritance tax (7yr gift is too late -85yrs old now). Also interested to know if my accumulation is also subject to IT if I move back to the UK even though it has been built up overseas. The www.gov.uk website is not the easiet read!
Has your father any other assets?
Does he have surplus annual income?
Does your father have a company pension or a SIPP pension?
If your father has tax-paid income left over after he has paid for all his living costs then he can make regular gifts out of tax-paid income for as much as he wants (of the remaining income) and these gifts are immediately outwith his estate.
The 7 year rule for gifts has taper relief that starts after the 3rd year of the gift. Therefore it may be worthwhile having another look at such gifts.
I deal with a similar situation for a relative and i have used all of the options to reduce his potential IHT bill.
HTH
#8
Re: Inheritance Tax and the law
The inheritance threshold is being raised gradually to £1,000,000 for a couple (£500,000 each). One spouse will inherit the other's threshold if they predecease them so your father will receive your mother's allowance. If your father lives until April 2020 then providing his estate is £1,000,000 or less then no inheritance tax is payable. If he dies before this date then only what is above the current limit will be subject to IHT, not the whole amount.
So the father's totals IHT free amount on leaving the then principal residence to the OP would be £825,000 in 2020. Thus, sticking with the assumed total of £1 million, the last £175,000 would be subject to IHT at 40%.
Last edited by Novocastrian; Apr 25th 2018 at 12:19 pm.
#9
Re: Inheritance Tax and the law
Are you sure Novo?
The estates are calculated separately and the additional threshold is transferred to surviving spouse.
I think that your point is pertinent and should be checked with a solicitor.
A deceased person may still be entitled to the additional threshold even if they no longer own a property.
https://www.gov.uk/government/public...-nil-rate-band
In addition, legislation in Finance Bill 2016 will provide that where part of the main residence nil-rate band might be lost because the deceased had downsized to a less valuable residence or had ceased to own a residence on or after 8 July 2015, that part will still be available provided the deceased left that smaller residence, or assets of equivalent value, to direct descendants. However, the total amount available won’t exceed the maximum available residence nil-rate band. The technical details of how the additional nil-rate band will be enhanced to support those who have downsized or ceased to own their home will be the subject of a consultation to be published in September 2015 ahead of the draft Finance Bill 2016.
The estates are calculated separately and the additional threshold is transferred to surviving spouse.
I think that your point is pertinent and should be checked with a solicitor.
A deceased person may still be entitled to the additional threshold even if they no longer own a property.
https://www.gov.uk/government/public...-nil-rate-band
In addition, legislation in Finance Bill 2016 will provide that where part of the main residence nil-rate band might be lost because the deceased had downsized to a less valuable residence or had ceased to own a residence on or after 8 July 2015, that part will still be available provided the deceased left that smaller residence, or assets of equivalent value, to direct descendants. However, the total amount available won’t exceed the maximum available residence nil-rate band. The technical details of how the additional nil-rate band will be enhanced to support those who have downsized or ceased to own their home will be the subject of a consultation to be published in September 2015 ahead of the draft Finance Bill 2016.
Last edited by cyrian; Apr 25th 2018 at 6:03 pm.
#10
Re: Inheritance Tax and the law
Are you sure Novo?
The estates are calculated separately and the additional threshold is transferred to surviving spouse.
I think that your point is pertinent and should be checked with a solicitor.
A deceased person may still be entitled to the additional threshold even if they no longer own a property.
https://www.gov.uk/government/public...-nil-rate-band
In addition, legislation in Finance Bill 2016 will provide that where part of the main residence nil-rate band might be lost because the deceased had downsized to a less valuable residence or had ceased to own a residence on or after 8 July 2015, that part will still be available provided the deceased left that smaller residence, or assets of equivalent value, to direct descendants. However, the total amount available won’t exceed the maximum available residence nil-rate band. The technical details of how the additional nil-rate band will be enhanced to support those who have downsized or ceased to own their home will be the subject of a consultation to be published in September 2015 ahead of the draft Finance Bill 2016.
The estates are calculated separately and the additional threshold is transferred to surviving spouse.
I think that your point is pertinent and should be checked with a solicitor.
A deceased person may still be entitled to the additional threshold even if they no longer own a property.
https://www.gov.uk/government/public...-nil-rate-band
In addition, legislation in Finance Bill 2016 will provide that where part of the main residence nil-rate band might be lost because the deceased had downsized to a less valuable residence or had ceased to own a residence on or after 8 July 2015, that part will still be available provided the deceased left that smaller residence, or assets of equivalent value, to direct descendants. However, the total amount available won’t exceed the maximum available residence nil-rate band. The technical details of how the additional nil-rate band will be enhanced to support those who have downsized or ceased to own their home will be the subject of a consultation to be published in September 2015 ahead of the draft Finance Bill 2016.
#11
Re: Inheritance Tax and the law
The main residence nil-rate band will be transferable where the second spouse or civil partner of a couple dies on or after 6 April 2017 irrespective of when the first of the couple died
...sorry.
#12
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Re: Inheritance Tax and the law
Hi thanks for all the posts. It is such a horrible tax. I am pretty much decided to leave Australia and move back to the UK and cut my losses financially. I will be taxed on my super and my estate will be hit hard as a single person. I have engaged a UK / Aus tax agent and working through the best option to ring fence as much as I can.
#13
Re: Inheritance Tax and the law
Hi thanks for all the posts. It is such a horrible tax. I am pretty much decided to leave Australia and move back to the UK and cut my losses financially. I will be taxed on my super and my estate will be hit hard as a single person. I have engaged a UK / Aus tax agent and working through the best option to ring fence as much as I can.
#14
Forum Regular
Joined: Aug 2016
Posts: 51
Re: Inheritance Tax and the law
Hi thanks for all the posts. It is such a horrible tax. I am pretty much decided to leave Australia and move back to the UK and cut my losses financially. I will be taxed on my super and my estate will be hit hard as a single person. I have engaged a UK / Aus tax agent and working through the best option to ring fence as much as I can.
#15
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Re: Inheritance Tax and the law
Hi, coming from Australia I have no inheritance tax on my estate including no tax on my super. The UK according to my tax agent does both. As a single person I don’t enjoy the double threshold that a couple gets so again the tax is larger. I am only going on advice. Ring fencing and/or creating a trust for my boys (both 12yrs) is an option. I am 53 so not a young mum so can’t recover financially / make up as quickly as younger parents/people. All I am saying it is a hard pill to swallow when you don’t have this in Australia and there is no agreement that whatever you accumulate overseas will be exempt.