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Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My daughter will be over the inheritance tax threshold by £40-£50

Resolved Question:

My daughter will be over the inheritance tax threshold by £40-£50 thousand, I understand amounts over £325,000 are taxed at 40%.Is there anything I could do? I am single and unable to spend it now as its mainly in a property
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

You could gift the property to your daughter, but if this is your own property (that you live in) then this can only be treated as a potentially exempt gift (which means its disregarded for Inheritance tax if you survive more than 7 years from the date of making the gift) by ensuring that you pay market rent to your daughter should you remain living there.

If its with respect to a property that is not your main residence, then the same 7 year rule applies - before it is disregarded for Inheritance tax, but then the transfer will trigger a capital gains position to address at the time of the transfer.

You could leave anything over and above the £325,000 threshold to charity - which will lower the value of the estate to be considered for Inheritance tax, but if this whole value is tied up in one property,this would force the sale of property - which may not be what you wish to happen.

Of course with the gifting and the 7 year rule, if you survive more than 3 years - then taper relief is applied on the gift - which lessens the amount of the gift liable to tax - I have added a table here that advises the reductions made -

Inheritance Tax is charged on gifts at 40%. But if the person died between 3 and 7 years of making a gift, you can apply what's known as 'Taper Relief' to the amount of Inheritance Tax due to reduce the amount payable.

Taper Relief reductions

3 to 4 years 20%

4 to 5 years 40%

5 to 6 years 60%

6 to 7 years 80%

Another consideration would be to put property in trust - but again the 7 year rule applies, and then there could e tax due on the trust, if income is generated from the asset placed within the trust.

But I have added a link here regarding thee types of trust to consider

But whatever decision you make as to taking this forward, so ensure that you seek both financial and legal advise to advise you in more depth.



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