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Post by bracknellboy on Nov 22, 2023 6:21:23 GMT
No inheritance tax between spouses. So when the first spouse dies, the inheritance tax allowance is unused so 2 x 500k when the second spouse dies.
This - 2 x 500k. There was the value of a house in this, you get an estate agent to give it a value, you are liable for tax recalculation if it sells for more, refund if less.That is interesting. I've been very recently told that unless there is a significant difference, no tax recalculation is allowed. I was also told that for valuation there were two potential options: 1. Get around 5 different estate agent valuations 2. Get a paid for RICS valuation The benefit of the latter, apparently, being that if the valuation is challenged the estate agents won't stand behind it. Whereas a RICS surveyor will stand up and justify it. This by the way was from a solicitor not from a RICS Surveyor (in case of bias doubt).
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benaj
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Nov 22, 2023 7:00:55 GMT
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Post by benaj on Nov 22, 2023 7:00:55 GMT
That’s a funny thing about market valuation. The estate agents estimate isn’t the price the buyer will actually pay. We have seen too many failed loans before. 🤣
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Post by mostlywrong on Nov 22, 2023 8:38:43 GMT
This - 2 x 500k. There was the value of a house in this, you get an estate agent to give it a value, you are liable for tax recalculation if it sells for more, refund if less.That is interesting. I've been very recently told that unless there is a significant difference, no tax recalculation is allowed. I was also told that for valuation there were two potential options: 1. Get around 5 different estate agent valuations 2. Get a paid for RICS valuation The benefit of the latter, apparently, being that if the valuation is challenged the estate agents won't stand behind it. Whereas a RICS surveyor will stand up and justify it. This by the way was from a solicitor not from a RICS Surveyor (in case of bias doubt). Interesting!
A scan of both IHT400 and IHT405 shows that HMRC does not define how to value the property. Those notes must be elsewhere!
I understood that CaptainConfident's view was correct; that there was a later adjustment of tax paid based on the sale price and expenses.
BUT these things change! And my experience was in 2012-14.
Somewhere, I also have a note that the remaining spouse (aka a sitting tenant) means that a 10% discount is applied to the valuation of the property but that appears to have vanished from HMRC's notes.
I suppose that one good point is that the professional fees of the RICS surveyor will be a deductible expense.
MW
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Post by mostlywrong on Nov 22, 2023 8:44:20 GMT
I thought 2 x £325,000. + maybe £175,000 for the house, do you get to do that twice? Edit: How the house is held? Assumption being any property is in joint names so 175k each.
And that any children are from that marriage.
If there aren't any surviving children, then the £175k allowance vanishes. Poof! Just like that!
MW
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james100
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Post by james100 on Nov 22, 2023 9:29:55 GMT
This - 2 x 500k. There was the value of a house in this, you get an estate agent to give it a value, you are liable for tax recalculation if it sells for more, refund if less.That is interesting. I've been very recently told that unless there is a significant difference, no tax recalculation is allowed. I was also told that for valuation there were two potential options: 1. Get around 5 different estate agent valuations 2. Get a paid for RICS valuation The benefit of the latter, apparently, being that if the valuation is challenged the estate agents won't stand behind it. Whereas a RICS surveyor will stand up and justify it. This by the way was from a solicitor not from a RICS Surveyor (in case of bias doubt). If property of significant value / relevance to IHT liability I'd definitely go with RICS valuation. And that RICS valuer would need to be experienced with providing valuations for HMRC / tax liability purposes, be brief-able on your exact issue, and ensure the number they provide is accompanied by watertight argumentation (both a) for your admin purposes so you don't have to repeat the process and b) to defend the number in future). No decent EA will recommend using their own valuation for HMRC instead of a RICS!
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Post by spareapennyor2 on Nov 22, 2023 9:38:37 GMT
moneysavingexpert email
- Anything left to a spouse (married/civil partners) is EXEMPT from IHT.
- You don't pay IHT on the first £325,000 of your estate left to others.
- This can be boosted to £500,000 if you pass on your main residence to your (biological/foster/step/adopted) children or grandchildren.
- You can pass on any unused allowance to your spouse, so if you left them everything, they could then leave £1m (your £500,000 and their £500,000) including their home to children or grandchildren. Any amount that isn't exempt is taxed at 40%.
- If an IHT bill is looking likely, gifting rules can cut/cancel it (whether from annual income or bigger gifts if you live long enough after).
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Post by bracknellboy on Nov 22, 2023 10:12:27 GMT
That is interesting. I've been very recently told that unless there is a significant difference, no tax recalculation is allowed. I was also told that for valuation there were two potential options: 1. Get around 5 different estate agent valuations 2. Get a paid for RICS valuation The benefit of the latter, apparently, being that if the valuation is challenged the estate agents won't stand behind it. Whereas a RICS surveyor will stand up and justify it. This by the way was from a solicitor not from a RICS Surveyor (in case of bias doubt). Interesting!
A scan of both IHT400 and IHT405 shows that HMRC does not define how to value the property. Those notes must be elsewhere!
I understood that CaptainConfident's view was correct; that there was a later adjustment of tax paid based on the sale price and expenses.
BUT these things change! And my experience was in 2012-14.
Somewhere, I also have a note that the remaining spouse (aka a sitting tenant) means that a 10% discount is applied to the valuation of the property but that appears to have vanished from HMRC's notes.
I suppose that one good point is that the professional fees of the RICS surveyor will be a deductible expense.
MW
My quick bit of googling has refreshed me of what I had previously read. If the property sells for more than the value, then their may be Capital Gains liability (rather than a recalc of IHT). At least that is what one thing says.
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benaj
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Post by benaj on Nov 22, 2023 10:18:40 GMT
As far as I know, most title transfer these days attracts CGT liability unless the property has been overpaid by a huge margin by the existing owners.
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Post by captainconfident on Nov 22, 2023 10:58:36 GMT
This - 2 x 500k. There was the value of a house in this, you get an estate agent to give it a value, you are liable for tax recalculation if it sells for more, refund if less.That is interesting. I've been very recently told that unless there is a significant difference, no tax recalculation is allowed. I was also told that for valuation there were two potential options: 1. Get around 5 different estate agent valuations 2. Get a paid for RICS valuation The benefit of the latter, apparently, being that if the valuation is challenged the estate agents won't stand behind it. Whereas a RICS surveyor will stand up and justify it. This by the way was from a solicitor not from a RICS Surveyor (in case of bias doubt). In the case of me and my brother, they accepted a valuation by a single estate agent.
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adrianc
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Post by adrianc on Nov 22, 2023 11:02:46 GMT
As far as I know, most title transfer these days attracts CGT liability unless the property has been overpaid by a huge margin by the existing owners. Don't forget main residences are exempt from CGT. If somebody pays £100k, never lives there, and sells for £1m, there's CGT to pay on the £900k gain. If they live there for the whole time, there's no CGT. If somebody inherits at a declared value of £100k, and sells for £1m, then there's still a £900k gain in their ownership... But the residence test still applies.
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benaj
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Post by benaj on Nov 22, 2023 11:45:10 GMT
As far as I know, most title transfer these days attracts CGT liability unless the property has been overpaid by a huge margin by the existing owners. Don't forget main residences are exempt from CGT. If somebody pays £100k, never lives there, and sells for £1m, there's CGT to pay on the £900k gain. If they live there for the whole time, there's no CGT. If somebody inherits at a declared value of £100k, and sells for £1m, then there's still a £900k gain in their ownership... But the residence test still applies. What about swapping houses. Mum and dad swapping main residence with son and daugther for smaller ones, any CGT liabilities? Say larger house owns by mum and dad and smaller house own by son and daughter .
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Post by mostlywrong on Nov 22, 2023 11:54:04 GMT
Returning to the theme of "which taxes would I cut?", I would ask the Chancellor to simplify the IHT regime. It is a mess. And it is poorly documented.
During Covid, a relative died. She knew she was dying and kindly sorted out her life and estate. She had asked me to be her executor.
Come the day, I did all the bits and pieces with her son, pushing and prodding as necessary.
Then came the paperwork. How do I tell HMRC that I have settled this estate?
Do I have to tell HMRC? Yes, the website is quite specific. Ok. What do I need?
Signed, witnessed and therefore valid will. Tick.
Estate valued at less than £5,000. Tick.
Beneficiary continuing to live in the same council flat. Tick.
Do I need probate? No. The bank and bldg soc released the dosh on production of the death certificate. All of the utilities, and the council, behaved themselves (a relative term) and transferred the accounts.
Looking good... now for the paperwork.
And, at this point, it all went downhill. There is no obvious mechanism for reporting a low value estate that does not need probate to HMRC, even though HMRC states that such a report is required.
I carefully completed IHT200 with lots of zeroes but the notes say this is part of applying for probate.
Circles. Lots of them. Days of research and hanging on a telephone line (failed).
Eventually, after reading a lot of websites like this one, I found a comment that reporting such an estate could be done through the Self-Assessment portal.
Although I have an SA account, I did not know that. So, I logged in and checked. And, yes, that is how you do it.
And that is where you will find the instruction that such small estates do NOT have to be reported to HMRC.
Googling the search terms does not produce anything. Using the HMRC's internal search engine does not produce anything.
I despair. I wrote to HMRC and they ignored me.
And breathe...
MW
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iRobot
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Post by iRobot on Nov 22, 2023 12:30:51 GMT
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adrianc
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Post by adrianc on Nov 22, 2023 13:09:00 GMT
Don't forget main residences are exempt from CGT. If somebody pays £100k, never lives there, and sells for £1m, there's CGT to pay on the £900k gain. If they live there for the whole time, there's no CGT. If somebody inherits at a declared value of £100k, and sells for £1m, then there's still a £900k gain in their ownership... But the residence test still applies. What about swapping houses. Mum and dad swapping main residence with son and daugther for smaller ones, any CGT liabilities? Say larger house owns by mum and dad and smaller house own by son and daughter . Values at the time of the exchange are the relevant ones. For CGT, it matters not how an asset is acquired or disposed of - gift, exchange, open-market sale, whatever. It's all about the values at the time of acquisition and disposal. If there's a disparity, then that difference would count as a gift for IHT taper (and may count for deprivation of assets if care home costs are needed).
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ilmoro
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Post by ilmoro on Nov 22, 2023 14:28:35 GMT
Clearly Chancellor not a forums reader ... NI cut 2%
ISA changes more exciting ... more than one same type
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