If there was a magic way of not paying inheritance tax, everyone would do it.
There would be two nil rate band is allowable, £325,000 each which means that you only pay inheritance tax on the value of the house for probate purposes, everything over £650,000.
Just because you pay the household bills doesn’t necessarily mean that you have a financial interest in the house because at present, it seems that it’s legally owned either by your mother or mother and father.
Even if they had transferred the property to you, to escape inheritance tax, then it is a Gift with Reservation which is treated as though it is not a gift at all but a sham gift because they continued to live in the property. For them to give you the property and it escape inheritance tax (after the seven year period) they would need to give you the property lock stock and barrel and divest themselves of any interest in it and you would have to have been able to have sold it or remortgaged it or dealt with it as every you wished.
I am not aware that any person who has been resident in the property and has contributed substantially to the property who has claimed an equitable/financial interest in the property successfully to mitigate inheritance tax. It is possible for the person who was been resident in the property and contributed substantially towards that property to claim an equitable/financial interest in the property and to realise that when the property sold but I’m not aware of it ever having applied to HMRC.
There may be some obscure case law somewhere which supports this contention but researching extensive case law is beyond the scope of the site. Barristers charge about £350 per hour for it and them advice on this is probably going to cost about £600 plus VAT.
What you would be looking to do would be to get the revenue to accept that you had an equitable/financial interest in the property by virtue of the contributions you have made to the fabric of the property over all these years and that that equitable/financial share should be exempt from inheritance tax.
As it is at present, the revenue will only consider the legal title which is whose name the property is currently registered in.
Can I clarify anything else for you?.
I’m happy to answer any specific points arising from this.
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