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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4879
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Asking on behalf of my father, who is 87. He has just sold

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Asking on behalf of my father, who is 87. He has just sold a commercial property for £540k. He bought the property in 1982 for £17k. He traded there himself from 1982 until his retirement in 2009. I accept that there is going to be a large CGT bill. Am I right that it will prob be in region of £150k? More importantly, I am concerned about IHT. After CGT, he will be left with net proceeds from the sale in excess of £350k. Will this amount be liable to IHT if it is unspent on his demise, or is there any form of relief because he has already paid CGT on it? Many thanks
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Hello and welcome to the site. Thank you for your question.

I am another UK tax expert on Just Answer. I am happy to help you with your question.
Please let me know if you wish me to proceed.

Many thanks
Customer: replied 1 year ago.
I am happy for you to answer as long as I am not incurring any more cost by asking you to do so
Expert:  taxadvisor.uk replied 1 year ago.
Margaret, thank you for your reply.There is no additional cost involved.You are correct in your understanding that disposal of property would give rise to CGT in the region of £150k.You are rightly concerned about IHT implications as the estate is likely to exceed the current threshold of £325k. The first £325k would be exempt and the balance taxed at 40%. As IHT and CGT are two different taxes, unfortunately there is no relief against CGT for IHT purposes.There are ways of reducing IHT by gifting money that is exempt for IHT purposes e.g. gifts up to £3,000 in total in each tax year. You can carry any unused part forward one year only to the next year. He could gift you £6,000 to cover tax year 2015-16 and 2014-15 provided there was no gift in the previous tax year.Gifts and their implications for IHT are explained herehttp://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/You could also get an insurance policy to cover potential inheritance tax I hope this is helpful and answers your question. If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.

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

Expert:  taxadvisor.uk replied 1 year ago.
Margaret, thank you for your reply.

I will revert to you shortly.

Many thanks
Expert:  taxadvisor.uk replied 1 year ago.
Maragret, thank you for your patience.


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.

Customer: replied 1 year ago.
My father can use my late mothers IHT allowance so at the moment £650k of the value of the house will be exempt. I know that he will get an extra £100k allowance in April 2017. Is it correct that there would have been a £100k allowance for my mother if she was still alive at that date, but my father will not be able to claim that allowance? Can you also give me a little more info about putting some monies into trust plse
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for reply.

I will revert to you.
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your patience [q]My father can use my late mothers IHT allowance so at the moment £650k of the value of the house will be exempt. I know that he will get an extra £100k allowance in April 2017. Is it correct that there would have been a £100k allowance for my mother if she was still alive at that date, but my father will not be able to claim that allowance? [a]The draft legislation states that where the first spouse died before April 2017, the transferable family home allowance is 100pc of the available allowance on the second death (provided the estate of the first spouse did not exceed £2m). Therefore, if your father were to die in 2017/18 when the family home allowance is £100,000, he may be entitled to his late wife's £100,000 allowance also. Under current IHT rules the surviving partner is allowed to use both tax-free allowances (providing one wasn’t used at the first death). So, if no part of the tax-free allowance was used on the first death, then there will be double tlhe allowance available on his death. This applies even if your partner has already died, provided they died after 21 March 1 An article in the Telegraph on new inheritance tax rules is useful and the link is herehttp://www.telegraph.co.uk/finance/personalfinance/tax/11742032/New-inheritance-tax-rules-we-answer-your-questions.html [q]Can you also give me a little more info about putting some monies into trust plse [a]Margaret, I am not an expert on trust law and tax and I feel it would be unprofessional for me to give you advise on a subject I don’t specialise in, I’m sorry.I am providing you links to general guidance on trusts here https://www.gov.uk/trusts-taxes/overviewhttp://www.thisismoney.co.uk/money/experts/article-2385532/How-trusts-help-minimise-inheritance-tax-liabilities.html I hope my responses have been helpful and answer your question. If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it by Just Answer.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4879
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer.

Best wishes.

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