Inheritance Tax

[237SJ]

I know that when someone dies, they will have inherited their late spouse's personal inheritance tax allowance. Would that be the allowance that was current at the time of the late spouse's death (as opposed to the current £325,000 allowance)?

[ToraToraTora]

They do not inherit an allowance, assuming an "all to the spouse" legacy they inherit the estate after tax and later in turn when they pop off the allowance of the day is applied to their estate.

[Old_Geezer]

Folk who have died don't tend to inherit anything.

I've not heard of an ability to pass on a tax allowance though. That's personal to the individual. Not that I'm an expert but that doesn't seem something one could pass on.

[DTCwordfan]

A person dies, the remaining widow(er) reverts to a single allowance as to income.

As to inheritance tax, it depends on how the will was set up.....things like houses and joint accounts stay functional with the widow(er) and it's then that the inheritance tax is calculated on a valuation at the time of their death, the problem for the beneficiaries being whether to get a low probate valuation if they intend to keep the house, or a high one to minimise capital gains if they intend to sell. That is set on a spread of maximum of seven years.

[237SJ]

As I understand it, for example, Mr Smith dies and has an inheritance tax allowance (£325,000) which goes to Mrs Smith. Mrs Smith inherits the unused portion of Mr Smiths allowance giving her estate a potential inheritance tax allowance of £650,000. What I`m not sure about is whether Mr Smith`s allowance was £325,000 which is the current level or was it the level that was set when he died (a few years ago)

[Peter Pedant]

Oh dear

I am pretty sure it is the allowance at the time of the second death
as 3T says

https://www.gov.uk/inheritance-tax/leaving-assets-spouse-civil-partner

is a useful site - o god read about different rules if the first one has died before 1975 or if agric/woodland relief has been used.....

[237SJ]

DT - they don`t revert to a single inheritance level. They have the married persons allowance.

[fiction-factory]

Hi 237SJ- have you mistyped your response to DTCwordfan there?

[237SJ]

I was going to do Probate myself but I think I might just leave it up to a solicitor. Thanks for the replies.

[Peter Pedant]

ess jay
your question is straightforward - ( figure now or figure then ? )

we think the answer is twice 325k

still think that the govt site is good
https://www.gov.uk/inheritance-tax/leaving-assets-spouse-civil-partner


An additional question is: suppose Mrs X died 2005 and gave away £20k but left the rest to her dear husband - is her passed on allocation 305k ?
or is the inflation uplift on £20 k applied so it is now say £30k and the passed on allocation £295 k
I am still lworking on th at one
BUT the site is good on taxation of estates....

[Peter Pedant]

SJ think twice about getting a lawyer involved....
and I am sorry for the loss

I would ask an accountant to be honest as it is an accounting problem and not a legal one - the law is straightforward....

first of all have a look at the govt site

[237SJ]

Thanks PP. My Dad died in April 2007 when the inheritance tax level was £285,000 so I was just wondering whether I`m looking at 2 x £325,000 or £285,000 + £325,000 for inheritance tax purposes. I know what you mean about solicitors though. I was very pleased with myself the other week because I did LPA for £1.75 (the postage cost) as opposed to £600+ via the solicitor. Sadly my Mum died before it became active so even more reason to be pleased not to have spent all of that money. I will look into it further for Probate but I`m so stressed at the moment, I might just pay someone to sort it out.

[ubasses]

The widow/er received the unused allowance of the deceased spouse and it is worked in percentages, on current day allowances.
So if the first person to die did not use any of their IHT, £325000 transfers across. If say, on your figure of £285000 tax allowance at earlier death that person bequeathed £28500 to a third party (10%). The present day sum of £325000 will be reduced by 10% (£32500).

[Peter Pedant]

237 SJ sorry about the loss

I still think it is 2 x 325 000

I think you can do probate by yourself - I did - at a time that IHT went from rebasing to the new one ( 1995 or thereabouts ) . We did get an accountant to do the calculations which was then agreed with the HMRC.

I blush at agreeing that this is so difficult that you should pay £200 /h into someone's pocket - it isnt.

Think about a deed of variation on the will - the Millibands I recall found it very useful to avoid tax on Gregor's wife's will - there's socialism at work for you !

There should be worked examples on IHT somewhere on the govt site
I will have a look

[Peter Pedant]

There is one here which is exactly what you need
( and is exactly as ubasses says )

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM43002.htm

I spent many many happy hours with the IHT manual - URL above
thinking to myself - well I am not paying someone £200 /h to read this crip....I wd rather do it myself

[Jackdaw33]

No, because no tax is deducted from your state pension, it is taken into account when taxing your occupational pension, who will provide the P60. If your state pension and occupational pension do not total £10,600 then you should pay no tax.

[Jackdaw33]

Ignore the above, it has ended up on the wrong thread.

[Peter Pedant]

HI Jack !

mis-post .... this should be in B&F personal finance
in the thread of the lady who had two pensions and wondered about tax