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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4795
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My father has recently died leaving his entire estate to my

Customer Question

My father has recently died leaving his entire estate to my mother. I am toting up his estate and have a query relating to how HMRC would deal with, in effect, my mother's estate. Let's say Dad's estate comes to 300K. Then my Mum dies in 2 years time worth
800K. Assuming the total transferred allowance available to be £650K. Would HMRC say you can have 2 pops at 325K so IHT on 150K or would they go "ah ha" the first estate was only worth 300K so plus your Mums 325K = 625K. So in that case it would be better
if my Dads estate did go over the 325K mark? Yes?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

, I'm Keith and happy to help you with your question.

Each deceased person has 325K of tax free estate before Inheritance Tax (IHT) kicks in. You are referring to the ability of a remaining spouse to add her deceased half's unused part of their 325K exemption from IHT to their own exemption limit.

Your Father will have will have used none of his 325K as inter spousal bequests do not count purposes, so a further 325K would be available to add to Mum's exemption giving 650K available on her demise. This 650K is, of course, inflated by any charitable and certain other bequests in her will. IHT is levied at 40% flat rate on any surplus over the 650K, but if charitable bequests exceed 10% of the estate the rate drops to 36%.

There is a further concession of which you may not be aware, that is Quick Succession Relief. Here is Caeser and Howie, The Central Scotland Law Group summary:

'Quick Succession Relief If a person inherits an asset on the death of another and then dies within a short space of time that asset will suffer IHT again on the second death. Quick Succession Relief mitigates this double taxation by giving a reduction on IHT payable on the asset on the second death. The amount of relief of credit is100% if second death occurs within 1 year of first death with a sliding scale relief up to a maximum of 5 years.

1 year or less 100%

1-2 years 80%

2-3 years 60%

3-4 years 40%

4-5 years 20%'

I do hope I have shown you how IHT works in practice.