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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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In their wills a husband and wife leave everything to one another.

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In their wills a husband and wife leave everything to one another. The Estate is worth £700,000.00. Included in that amount is a house worth £120,000.00.One of the parties dies. The survivor is concerned about the tax implications.
My understanding is as follows
Gross Estate £700,000.00
The house passing by survivorship £120,000.00
Spousal Exemption £250,000.00
Net Estate is therefore £330,000.00.
Tax is payable on £5000.00 at 40%.
Therefore £2000.00 tax is payable.
Is this correct?

Thanks for your question

No - anything left to each other does not form any part of the exempt allowance for the estate - its only assets/money left to others of gifts made in the last 7 years that were not exempt.
This is assuming you are both UK resident.

So, if all the estate is left from the first spouse to the second, and they have no gifts to consider for the last 7 years,then they have a full NIL threshold to pass to the surviving spouse, so when the second spouse passes away they have 2 x £325,000 nil band - so a total of £650,000 exemption on their estate. Then tax is due on any amount over and above the £650,000

So with a gross estate of £700,000 and there only being the second spouse, the first £650,000 in exempt and there then is £50,000 x 40% = £20,000

I am not sure where you get your exemption allowances from - or why you have deducted the house - but the information above is how its calculated.



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