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Tax status of adult offspring still at home

(3 Posts)
dilbar Sat 13-Aug-11 12:35:50

How does the Inland Revenue treat the living cost of adult children borne by parents before their death? Is it considered as a gift for the IHT purpose and if so how is it valued? Or if the offspring were to pay rent is that taxable or should we put in a claim for rent-a-room relief.
I believe that if offspring is a student that counts as an allowable expense but the offspring in question is no longer a student.

CogitoErgoSometimes Sat 13-Aug-11 13:25:31

First you need to work out if your estate is worth more than the IHT threshold - currently £325,000 for an individual. If not then there is no IHT to pay. If it is higher then the IHT then tax will be deducted on the excess. A family member living at your house, therefore, would not affect the value of the estate or the liability for IHT.

There are ways to gift cash or assets, exempt from IT, to adult children before you die and they are explained here

There is a situation where - in an effort to avoid IHT - parents give their property to adult children (or sell at a very low price) but continue to live in the house, rent-free until they die. In that case, the tax due on the benefit i.e. free accommodation, would be deducted from the deceased's estate before distribution.

Rent-a-room relief, I think I'm right in saying, does not apply to family, only paying lodgers.

You may benefit from either seeing a solicitor or talking to CAB to understand how best to approach inheritance planning.

Gonzo33 Tue 16-Aug-11 07:54:28

dilbar what costs are you referring to? Every day things like food, electric?

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