If someone were to inherit a mortgage free house, would they pay inheritance tax when selling it?

[SendMyLoveToYourNewLUHuvahh]

Say the house was worth £400-£450k

Is it possible to have to pay £80-£100k inheritance tax?

I realise that inheritance tax exists of course. But this is what we were told and my mum said it doesn't sound right.

I'm wet behind the ears so thought I'd ask here.

TIA

Thumping on our food

*door

Inthedesert is that right? It doesn't seem right (but I'm not connected up to my legal database and so I can't check). I'm not sure that the spousal exemption would pass right down to grandchildren.

Did your mother own the house out right? My mother died 12 years ago, my father in April. His whole estate including the house came to about £450K, but we can use my mothers £325K allowance as well, meaning we don't pay any inheritance tax.

It isn't my mother, in fact would you believe it it's not someone we are related to at all.

I'm still not sure I've quite got my head round it.

The house is owned outright, yes.

But this makes no sense.

We get given a house and we have to find 50k out of our own pockets

Welcome to the shitty world of inheritance tax.

Please get some proper advice. And in writing so you can refer back to it. I assume that if you are inheriting a house from someone that you are not related to that they had a large estate and you got part of it in which case the whole value may be chargeable to inheritance tax. In any case it's for the executors of the estate to sort out.

Just as an aside, if you live in the house as your home, the increase in value from the date you receive it to the date it is sold is tax free as long as you do not have another property. If there is another property it can get more complicated.

That is right curly
www.gov.uk/inheritance-tax/overview
It's not so much that the spousal exemption is carried over to other relatives it's that the surviving spouse "inherits" any unused portion of the first deceased's 325 tax free limit - and if the first to die left everything to their spouse then that means that they wouldn't have used up any of their limit, and the surviving spouse has a whole 650 to use on their death.

You have no responsibility to pay inheritance tax on the property. The tax is paid by the executors administering the estate from other assets in the estate or from a life insurance policy etc.

There may be cases where the will states that you inherit the property but are responsible for the tax on the property.

The only way to be certain is to discuss the situation with the executor.

When you sell the property you may have to pay Capital gains tax but that depends on whether you live in the property as your main house.

Curly, it doesn't matter who it goes to, more that because the spouse who died first left everything to the other, and didn't use any inheritance tax allowances, the deceased can use both of them.

SendMyLove you (or you and a solicitor) need to see the will. If the estate is big your Mum may have been left it "free of taxes" in other words, all the cash is used to pay any inheritance tax due, and you get the house in its entirety. The tax is due on the whole lot, not the bit that is given to you. It may well be you don't have to pay any tax, as its already been dealt with.

Say you had an extremely wealthy family member who died, leaving 10 kids and £3,250,000 (over 3 million). Each kid wouldn't get 325,000 and no tax to be paid. You would take the take free allowance off the total, give HMRC a heafty chunk (1 million), and share the rest out between the kids, giving them a meer quarter of a million each.

I just want to reiterate that I totally understood that we may need to pay inheritance tax. I don't have beef with this.

It was that I was reading it as though we needed to find such an amount even before we had the chance to sell.

You are given some time to pay.... but you have a £4525k house, so you either mortgage it to pay the IHT or sell it and pay the IHT out of the proceeds.

*£425k

Ok I've spoken to my partner and its capital gains tax, so it would be 20% of what the house is worth so it would be about 70-80k.

If the asset (the house) doesn't pass to you until the owner dies, then the owner's estate pays the IHT due. That may mean you don't get the house if it needs to be sold to pay the bill.

If you own a second property then you may be liable for CGT when you sell it. The amount may vary on a sliding scale if you have lived in it as your main home.

OP your partner is not correct. Please get some proper advice as you seem very confused.

He's absolutely adamant. Says the person who told him (the executer of the will) is a financial adviser.

How do I find out for sure then?

Why would it be capital gains tax when it's inheritance? Think about it.

Rules here re CGT and inherited property

I don't know. More to the point why would this guy tell you partner this? He makes no profit from giving us this information. I'm so confused!

Capital gains is a tax paid if one person owns an asset for a while, it increases in value and then they sell it. It isn't payable on inherited assets in your situation.

Did you get it as a result of a will? Or was it gifted to you before the person died.

The executor may be wrong, in any event, you aren't their client so they have no duty of care to you.

It was in the will after the person passed away.

It is really unlikely to be CGT. There's an automatic uplift for CGT on death. If it is CGT then it's payable a year and a bit after sale depending on the sale date. Not before sale.

IHT would be payable by you if the house was left to you subject to tax. Only the first 10% of the tax is due immediately though and the balance annually for 10 years or immediately after sale if you sell within ten years.

If you're planning to sell then you've not got too much to find.