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Will My Home be Liable for Inheritance Tax after I Die?

30th July 2018

Whether or not your home will be liable for Inheritance Tax will depend on a number of circumstances. These include whether your Estate (everything owned on date of death) exceeds the Inheritance Tax threshold, how the property is owned and who the Beneficiaries of your Estate are.

For free initial advice and guidance call our Probate Advisors on 03306069584 or contact us online and we will help you.

What is the Threshold before Inheritance Tax is Paid?

In England and Wales, the current threshold before a person's Estate is liable to pay Inheritance Tax is £325,000. If your spouse or civil partner passed away before you and you received their entire Estate, then the threshold may be doubled to £650,000, as their unused tax allowance can be transferred to you.

The value of your Estate that sits above the Inheritance Tax threshold will be taxed at 40% unless there are any exemptions or allowances available. Our Probate Solicitors will ensure that all your Inheritance Tax exemptions are applied, as part of our Probate Complete Service. We also deal with HM Revenue & Customs (HMRC) on your behalf.

How is Your Home Owned?

If you own your home by yourself then the whole of your home will be included in the Estate value. If you own your home with someone else then the value of your share of the property will form part of your Estate (if you own an identifiable share).

The more valuable your home is the more likely it is that there will be Inheritance Tax to pay.

Is Your Estate Exempt from Paying Inheritance Tax?

If your Estate exceeds the Inheritance Tax threshold but you have a valid Will that gives at least 10% of your Estate to charity, the rate of Inheritance Tax will be reduced from 40% to 36%. If you leave your whole Estate to charity then there will be no Inheritance Tax to pay regardless of your Estate value. This is because gifts to charities are exempt from Inheritance Tax. For more information, see Gifts and Donations to Charity in a Will.

If you have a valid Will that leaves your whole Estate to your spouse or civil partner then there will also not be any Inheritance Tax to pay. This is because gifts between spouses are also exempt from Inheritance Tax. If you have not made a Will then inheritance laws called the Rules of Intestacy will apply. If you are married or are in a registered Civil Partnership, then your spouse or civil partner will be the main Beneficiary under these rules, so again there will be no Inheritance Tax to pay.

Furthermore, if your home is being left to direct descendants (your children or grandchildren, for example) then there's an additional tax allowance that can be applied here. This is called the Residence Nil Rate Band.

Will Your Home have to Be Sold to Pay the Inheritance Tax?

If there is Inheritance Tax to pay then on your Estate then the tax can be paid from the assets owned in your own name such as bank accounts, shares and investments. However, if there are not sufficient funds in your own name to meet the Inheritance Tax bill then your Beneficiaries may have to consider selling your home.

This may also be the case even if your home is owned jointly with another person as Tenants in Common, or as Joint Tenants if the deceased's Estate can't or doesn't pay the Inheritance Tax.

Our Probate Specialists can discuss your circumstances and advise you on your options for paying Inheritance Tax. For more information on when and how Inheritance Tax needs to be paid during Probate see When Does Inheritance Tax Have to Be Paid in the Probate Process?

Whether or not your home will be liable for Inheritance Tax will depend on a number of circumstances. These include whether your Estate (everything owned on date of death) exceeds the Inheritance Tax threshold, how the property is owned and who the Beneficiaries of your Estate are.

With our Probate Complete Service we deal with HM Revenue & Customs (HMRC) for the Inheritance Tax, Capital Gains Tax and Income Tax matters of the deceased. We can also pay all the costs of a Co-op Funeralcare funeral, providing the Estate owns sufficient assets which can be sold in due course to repay our costs.

To speak with a Co-op Probate Advisor call 03306069584 or contact us online and we will call you.

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