How to Avoid Paying Inheritance Tax on a House

If you plan to pass your family home onto your loved ones when you die, you may wish to reduce the inheritance tax applicable on your property. In order to find out more on this subject keep reading, as Prestige Tax and Trust Services explains how to avoid paying inheritance tax on a house.

Inheritance tax

Under UK law, if the value of your estate eclipses a certain threshold (currently £325,000) when you die, it has to pay an inheritance tax of 40% on the remaining assets. The responsibility for calculating and paying inheritance tax typically falls on the executor or administrator of your estate.

In some cases, such as with property, your beneficiaries may be responsible for paying inheritance tax if your estate cannot pay itself. Either way, you may wish to completely negate the inheritance tax due on your home, so that your loved ones can receive your full estate. It is possible to completely avoid paying inheritance tax on a house, as long as the property in question is your main family home.

Passing on a house

If you pass on a house to your spouse or civil partner, there is automatically no inheritance tax due. But if you leave the house to another person via your will, it will count towards your estate. We should note that as of 6th April 2017, you can acquire a larger inheritance tax threshold on your estate if you leave your family home to your children (whether natural, adopted or fostered) or grandchildren.

You can also avoid paying inheritance tax on your home if you move out of the property and live for seven more years before passing away. We should point out that it is possible to move back into the home after giving it away. You must, however, live there for at least seven years, pay rent to the new owner at a similar rate to other local rental properties and pay your fair portion of the house’s bills.

Yet, you do not have to pay rent to the new owner of the property if you either only give part of it away, or those parties also live within the home. Also, we should explain that if you pursue this course of action and pass away within seven years, your home will be regarded as a gift for inheritance tax purposes. Therefore, its inheritance tax bill will be determined via the seven year rule.

Prestige Tax and Trust Services

In other words yes, if the property in question is your main family home, it is possibly to avoid paying inheritance tax on said property. But UK inheritance tax laws can be complex, so it is wise to enlist expert help when handling this matter. Prestige Tax and Trust Services can help; our team has the legal knowledge and experience needed to help you navigate inheritance tax issues effectively.

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