My mother has recently died and her estate is worth £500,000, will I need to pay Inheritance Tax?

The current threshold for Inheritance Tax (IHT) is £325,000. This is known as the nil rate band. Where an estate exceeds this amount and the beneficiary of the estate is non-exempt from IHT, then IHT will be payable on the excess at 40%. As a child of the deceased you are considered to be non-exempt and therefore the amount of IHT payable could be as much as £70,000 (being 40% of £175,000).

However, if your mother was a widow and she had inherited her late husband’s estate then the Executor of your mother’s estate could claim his unused nil rate band. In this instance the amount to be claimed could be as much as £325,000, which when added to your mother’s IHT threshold of £325,000 could give your late mother’s estate up to £650,000, free of IHT. If this is the amount that can be claimed then no IHT would be payable.

However, there are factors which must be taken into account in calculating how much of your mother’s late husband’s nil rate band is available to claim, including, but not limited to, whether he made any gifts during the 7 year period before his death. We would be able to help you with this and with the preparation of the relevant Inheritance Tax forms required by HMRC to make this claim, which could potentially provide you with a saving of up to £70,000.

For further information about purchasing a retirement property please contact our Wills & Probate team.