Inheritance Tax And Property

A lot of our clients who own properties don’t necessarily know the complex rules and regulations when it comes to inheritance tax.

They come to us asking for estate planning advice on the most efficient ways to pass on a property. Fortunately, we are in a position to provide it.

No matter what the size of the estate or value of the property, our team of experts can advise on the best way to protect it from inheritance tax.

In 2020/21, inheritance tax continues to be charged at 40% on most estates that exceed the tax-free threshold of £325,000.

Additional allowances are available on top of this amount to raise the tax-free threshold that applies on the estate.

Residence nil-rate band

The residence nil-rate band, or family home allowance, is a useful estate planning strategy to pass on your main residence to a child or grandchild.

This allowance is worth an additional £175,000 and sits on top of the £325,000 nil-rate band.

For example, if you express a wish in your will to leave your home to your daughter, the first £500,000 of your estate will be tax-free.

This allowance can double to £1m for married couples and civil partners, as your individual exemption will pass to your partner when you die.

When your surviving spouse or civil partner dies, the first £1m of their estate will be tax-free if the family home goes to a direct descendant.

Jointly-owned property

Property often forms part of the deceased’s estate and most people assume they will automatically inherit the whole estate when their spouse or civil partner dies.

To make sure this will happen, put your property into joint names. This splits the property into 50/50 ownership and will ensure the other inherits the property. HMRC refers to people in this situation as ‘joint tenants’.

Inheritance tax might be owed at 40% if the whole of the deceased’s estate is worth more than £325,000 and the deceased’s estate cannot or does not pay.

Tenants in common

Owning a property as ‘tenants in common’ is a useful estate planning strategy if you wish to leave a share of a property to anyone except your spouse or civil partner.

This can apply to people who are in second marriages who wish to leave a share of their home to their respective children from relationships with previous partners.

Usually, this approach provides more clarity in terms of who owns what share of the property. It can also give more choice when it comes to passing their share onto someone else.

You might have to pay inheritance tax on the deceased’s share of the property if the whole of their estate exceeds £325,000.

Wills & intestacy

If you don’t share ownership of a property or as tenants in common, consider writing a legally-valid will if you wish your spouse or civil partner to inherit a property in your estate.

These usually need to be signed and witnessed in person, although the law has just been temporarily changed because of COVID-19 to enable you use platforms like Zoom or FaceTime until 31 January 2022.

If you die without a will, intestacy rules will apply to your estate. If children are involved, your spouse or civil partner inherits any personal possessions along with the first £250,000 of the estate and half of any amount above this. Your children will be entitled to receive equal shares of what’s left.

Estate planning is essential to make sure your wealth is protected for you and your family. By structuring your assets in a tax-efficient way, you can make sure everyone is provided for in the future. To find out more, get in touch with us at or on 01454 619900.

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