Inheritance Tax

[Stargazer]

how much is it and who decides how to value the house?

[TheWinner]

To value the house, you normally ask 3 estate agents to value its selling price. They should all be a similar figure, but if ones a bit lower and ones a bit higher, you go down the middle for your guide.

[barry1010]

Inheritance tax is 40% of the value of your estate over £325,000
Example
Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).
https://www.gov.uk/inheritance-tax

There is no inheritance tax if your estate is left to your spouse, civil partner or a charity

[Stargazer]

at what point does it have to be paid? If my children delay selling my house until they have sorted it out and sold the contents is the IHT assessed on value at date of death or at the date of selling the house?

[Zacs-Master]

In Barry's link it says:
'f you own your home (or a share in it) your tax-free threshold can increase to £500,000 if:
you leave it to your children (including adopted, foster or stepchildren) or grandchildren
your estate is worth less than £2 million.

[barry1010]

The value when the house is sold

[barry1010]

My last reply was totally wrong, apologies for that.
Inheritance tax must be paid within 6 months of death, any longer than that and interest will be charged.
This doesn't mean the house must be sold - the inheritance tax can be paid from other assets.

[barry1010]

Don't forget that inheritance tax is payable not only on the value of the house - it is the entire estate - property, possessions, money, everything you own that has a value

[Canary42]

I believe you have to provide HMRC with three valuations and they decide - this is designed to prevent you getting a "friendly" agent to provide a deliberately low figure (for a cut, obviously).

[Peter Pedant]

Have you made a ......will
far more important

I bet your answer is gonna be - - I will !
haw haw haw

[Canary42]

Come come Peter, this is Law not Chatterbank.

[Peter Pedant]

value at date of death

When it comes to valuing property for IHT purposes, the value that must be established is referred to as the 'open market value' which is the value that the property would reasonably be expected to achieve if sold on the open market at the date of death (Section 160 of the Inheritance Tax Act 1984).

If there is a large share holding then buy ( clearly you dont) buy a copy of The Times or FT on the day of death

If the valuation is 200k and the lucky heirs sell for £300k three years later then they pay CGT on the gain
( if there is a loss, then they can claim back some IHT - not often used I can tell you. ie it is not a claimable CGT loss)

Taxation of estates is not rocket science
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual

This is TERRIBLY boring but clear and covers just about everything - inclluding huge swathes you can skip as it doesnt concern you

[Canary42]

Having been there, I can agree it's bloody boring but has to be done. The intriguing part in my case was that I had a set of circumstances which was very rare (and not covered unequivocally in the guidance material), but when I rang the Help Line they were as uncertain as I about what to do - I got the impression the eventual answer was just to get rid of me (calls were recorded so I was fairly safe from any adverse circumstances after submission). It all went through without a hitch in the end.

[Stargazer]

Zacs just to check you are not exempt from IHT if you leave your house to your children are you?

[barry1010]

No, your estate is not exempt if you leave it to your children but tax is paid only if the estate exceeds £500k. So no tax at £500k but 40% paid above that threshold

[bednobs]

no

[Ryzen]

If you are married or in a civil partnership and your partner dies, leaving their share of the estate to you,you may be entitled to any unused basic entitlement ...resulting in a basic entitlement of 2 x £325k = £650k before IHT becomes payable from your estate upon your death.

[ToraToraTora]

this may help you avoid IHT, eg you could give the place away now if you live 7 years nowt to pay. (they'll have to agree not to chuck you out!)
https://www.growthcapitalventures.co.uk/insights/blog/how-to-avoid-inheritance-tax-key-considerations-and-strategies

[THECORBYLOON]

If you follow TORATORATORA's advice, you will need to pay the going rent for the area.

https://ackroydlegal.com/what-are-the-rules-surrounding-gifting-property-to-my-children/?utm_source=rss&utm_medium=rss&;utm_campaign=what-are-the-rules-surrounding-gifting-property-to-my-children

[Peter Pedant]

no - TTT advice is wrong
you have to pay market rent too your dear children or else the transfer is null

To repeat - if you leave your house to your dear children, depending on its value - you are STILL liable to IHT - at 40%- depending on the value of your estate at death ( over £325k/500k )