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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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If the value of an estate is,say, £600,000, and there are 3

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If the value of an estate is,say, £600,000, and there are 3 sons who stand to inherit from the sole surviving parent, will inheritance tax be payable by any of the children (assuming that the inheritance tax threshold is for each son is £325,000), or will the tax be due on the value of the estate (so inheritance tax payable on £600,000), then what is left is divided between the 3 sons (so effectively, the sons pay inheritance tax)?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question..Inheritance tax is normally payable out of the estate and the recipient of the legacy (amount after IHT) receives it free of tax.The burden on paying IHT by the legatee would only arise if they was no money to pay IHT (e.g. tax due on gifts made during the last seven years before death)More information on this can be found under "Who pays the inheritance tax" herehttp://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-thresholds-rates-and-who-pays/ Inheritance tax is not payable on the total value of the estate but on the value that exceeds the threshold (£325,000 per person or in the case of married couples and civil partners - they are allowed to pass their possessions and assets to each other tax-free and the surviving partner is allowed to use both tax-free allowances (providing one wasn’t used at the first death). More information on this is found under "Inheritance tax thresholds and rates" 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.
Hi, just to be clear on your answer, there will be no inheritance tax to be paid by any of the sons, as the value of the estate will be split between them, so they each inherit £200,000, which is below the IHT threshold - is my understanding correct?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.It is the value of the estate that determines the amount of IHT payable and not what each son is going to inherit.If you are have a threshold of £650,000 available because you were passed all the possessions and assets by your spouse on first death, then there would be no IHT payable as the estate is worth less than the threshold.On the otherhand, if your threshold is only £325,000 and the estate is worth £600,000 then there is IHT payable on (600,000-325,000) £275,000 at 40% making the amount available for distribution (600,000-110,000) £490,000 and each son would inherit £163,333 and not £200,000. I hope this is helpful and answers your question.
Customer: replied 1 year ago.
Apologies, but still confused. My understanding is that the IHT threshold is £325,000 for children, but you have mentioned a threshold of £650,000, so I do not know where I stand as it appears from your answer that the IHT threshold is not set in stone. My father died some 25 years ago, leaving my mother and three children. Is our IHT threshold £325,000? From your previous answer, this would mean that we are liable for IHT?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply. If your father passed all his possessions and assets to your mother then the surviving partner (i.e your mother) is allowed to use both tax-free allowances £325,000 x 2 (providing one wasn’t used at the first death).Assuming the above scenario applies then the estate with a potential value of £600,000 would be lower than available threshold of £650,000 and therefor no IHT payable.In this case each son would inherit £200,000. I hope this is helpful and answers your question.
Customer: replied 1 year ago.
Final question - what do you mean '(providing one wasn’t used at the first death)?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply..In simple terms, if your father had given all his possessions to your mother and left nothing for anyone else, then his IHT allowance of £325,000 is intact and your mother would be able to avail the double allowance of £650,000. On the other hand, if he had left £50,000 to his children and the rest to his wife, then he had unused allowance of (325,000-50,000) £275,000 available on top of your mother's allowance of £325,000. I hope this is helpful and answers your question.I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.
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Customer: replied 1 year ago.
Thank you
Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer. Best wishes

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