UK’s horny as hell for Inheritance Tax planning..
Nobody, anywhere, ever, voted for a redistribution of their wealth when they die
The question we’re currently asked more than any other is ‘How can you give away your home and legally avoid Inheritance Tax?’
Well, IHT is due on your estate above £325,000. Homeowners can pass on an additional £175,000 to direct descendants via the Residence Nil-Rate band. Couples can share their allowances so that’s up to £1m in total, IHT free
However, if your total assets exceed £2m, that all unravels pretty quickly
There are strict rules around gifting property but giving your home to your children, and surviving the gift by 7 years, is one solution.
Large gifts are outside of your estate after 7 years and Taper Relief applies on a sliding scale up to then
If you continue to benefit from your property after you’ve given it away then it’s a Gift with Reservation, and IHT will be due on the transfer at death
If you want to keep living in your home, then pay the new owners a full market rent. Not as bad as it first sounds, as the owners are your children, and you’ll likely leave that money to them anyway!
If the gift to your children is your Principal Private Residence there should be no Capital Gains Tax (CGT) to pay, but that’s not the case with investment properties or buy-to-lets
You’ll need a lawyer to draft a deed of gift, and don’t forget to update ownership details with Land Registry
Maybe you need help with that gifting your family home to your children or more complex IHT planning?
We’d like to work for you. Arrange your FREE power-hour family legacy planning discussion here. You’re free to accept, or refuse, and there’s no obligation whatsoever
All tax advice is provided, in writing, by a Chartered Tax Advisor
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