Apologies, I did not explain things properly. My father's house, where he still lives, is worth approx £800k and it is owned outright. My mother passed away in 2002, leaving everything to my father, so he has her IHT allowance also, but even the joint allowance will not cover the value of the house. Hence the £526k he has just received is wholly liable to IHT. He is going to set aside £150K into bonds in his name to meet the CGT bill in Jan 2017, leaving him with over £350k. He has already gifted £5000 last week (£2500 each to 2 friends). Apart from gifting the money, and surviving 7 yrs, or insurance, are you able to think of any other way of mitigating the IHT? It seems outrageous that he could end up paying £150k CGT AND £140k IHT, Many thanks
With changes announced in July 2015 budget, IHT threshold will be increased to £1m in stages over the next 4-5 years.
The Government will add a “family home allowance”, eventually worth £175,000 per person, to the existing £325,000 tax free allowance from April 6, 2017.
This will be worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21. This will allow individuals to pass on assets worth up to £500,000, including a family home, without paying any IHT at all. For married couples and civil partners, the total is £1m.
I wish your father a long life.You should consider getting an insurance policy to cover potential IHT.
Any amounts left for charities is exempt from IHT … you may wish to consider that rather than paying 40% to Government.
Gifts mainly to companies and to the trustees of most types of trusts are taxable at the time you make them and tax is paid at half the normal rate of IHT – currently 20%. You wish to talk to a trust lawyer/expert on this subject.
I hope this is helpful.