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

you need to get the house valued by a RICS surveyor, it might come back as worth less than the market value and you'll pay less inheritance tax.

The tax is paid on the whole estate though, so (if it was a large estate), the executor may have already settled this, in which case you'd only pay capital gains tax once you sold.

There are options with paying the inheritance tax. If it's all from a house sale you may be able to get them to wait until it's sold (I think they can put a charge on the house with the land registry) if you're planning to sel quickly. There are also inheritance tax loans available.

Speak to a probate solicitor.

If this is a property that has been left to you in a will - an inheritance - then the estate of the deceased pays the IHT due, not you. I don't understand why you are asking about the IHT at all? The executor is responsible for paying the tax liabilities of the estate.

Is the property passing to you or is the executor selling it and giving you the proceeds?

Definitely not CGT. Are you the only beneficiaries of the will? The first £325kis tax free, the amount above that is subject to 40% tax. This would normally need to be paid within 6 months of the death. But you can't get probate until it's paid, and you can't sell the house until probate is granted, so HMRC have scenes to allow you to pay IHT in instalments for up to 10 years- especially where main asset is property. The executor of the will can help with this, and if that's you, the probate office will help.

IHT needs to be paid on the probate value of the estate - £325k. It is advisable to get estate agents valuations of the property determine this value. If the eventual sale price of the house exceeds the probate value, you will also be liable for CGT on the difference. So you can't say the hpsue is worth £325k and then sell a year later for £500k and not pay tax.

Are you the executor as well? If so HMRC are v helpful, both on website and phone.

Thanks I will call HMRC tomorrow.

She had several properties. Does this make a difference?

If this is a property that has been left to you in a will - an inheritance - then the estate of the deceased pays the IHT due, not you. I don't understand why you are asking about the IHT at all? The executor is responsible for paying the tax liabilities of the estate

Not if it's a specific legacy subject to tax

I inherited a house and never had to pay CGT. I believe if I had kept the house for a period of time before selling then I would have had to have done.

Yes it does as that suggests her entire estate will be well above IHT limit and beneficiaries may have to share the IHT allowance depending on wording of will. That's something executor should sort, but it may mean you would be liable for 40% IHT of total probate value

Ok so it could be that because she owned two properties, we could be liable to pay inhertiance tax from the sale of the house?

If we didn't sell the house and lived in it, would we then have to to take out a mortgage to cover the inheritance tax?

Have I got that right?

I'm confused why it's 40% now, the executer said it would be 20%?

I think the executors of the will might be paying the IHT tax from the estate and that's why you won't have to. Maybe you've been told 20% because that's the CGT you'll have to pay if you sell the house and it's gone up in value since you inherited.

The only way to be sure, of course, is to speak to the executors. You probably need it all in writing as well.

It obviously depends on the wording of the will but likely you would benefit from a proportion of the iht worse case scenario. You do need to see the will to understand it. However, congratulations on such a life altering sum. I hope it brings you the security that the benefactor intended x

Yes, if you wanted to keep the house and live in it, you could try to get a mortgage on it for the amount of the inheritance tax due.

Thank you. Really appreciate the info.

As you can see, Im painfully stupid when it comes to this kind of thing. It's an absolute shock.

I would ring the HMRC for the definitive answer, as we don't know all the circumstances of the bequest it's difficult to comment.

Good luck with sorting it all out.

www.gov.uk/tax-property-money-shares-you-inherit

Thanks. I just tried calling, HMRC were unhelpful (I got through to the wrong department, they transferred me, only to be on hold and them cut me off).

I then called the probate and inhertiance tax line, but they are only open Monday to Friday....

OP

The executors should produce accounts that go to all beneficiaries. It's their responsibility to see the tax paid on the estate, from the estate's value. It may be that the will makes provisions for the IHT to be paid from other assets.

Have you seen a copy of the will? That would help a lot!

No not yet. It's only happened very very recently. In the last two weeks.

How long does it take for the will to be read?

Ok, I think you need to take a breath. No tax will be due for a while so you've got time to figure things out.

Ok thank you.

The actual reason I'm asking is that because of the amount of tax that may be taken means that we aren't agreeing on what to do with the property. If I can find out for sure what tax may be taken then we can move forward, it bothers him far more than it bothers me....

Do you know how long it takes for the will to be read?

Here's something about seeing a copy of the will - but the easiest thing at this stage is to ask the executor for one:

www.askaboutmoney.com/threads/rights-of-a-beneficiary-who-is-entitled-to-see-a-will-and-related-issues.176924/

AFAIK (not a lawyer), the executor will be the person to tell you whether or not the house needs to be sold to pay IHT (or a mortgage or loan raised on it if you prefer that) or if there are other assets to pay the IHT. It's all going to take a while to sort out - properties need to be valued etc - so if you were thinking of moving in straight away or something, that probably won't be possible.

Sorry for your loss

The length of time to get things sorted is a bit like how long is a piece of string.
FWIW, my Grandmother died in January. The house in on the market, but the bank account cannot be accessed yet, as probate hasn't been granted (I think a useless solicitor is involved, my Uncle thinks otherwise).
Answers aren't going to be known yet. Before you know how much tax is due, you need to know how much the estate is worth. This is going to take time.

The £40k answers above were assuming the house was the only asset. It sounds like this assumption was wrong. The max tax due is unknown at this stage.

Ok thank you.

Yes the amount of IHT payable is unknown and depends on the details of the will. It could be literally anything from zero if the house has been left "free of tax" with thre residue to pick up the tax bill, up to 40% of the entire value of the property.

I just checked with dsis who knows more about this than me and she says if the house was a legacy then the iht is paid out of what remains after all legacies have been paid IF there is enough cash in the pot. It all depends how the will is worded and how much the estate is worth

Thank you.

I just checked with dsis who knows more about this than me and she says if the house was a legacy then the iht is paid out of what remains after all legacies have been paid IF there is enough cash in the pot. It all depends how the will is worded and how much the estate is worth

If the Will is worded the "right" way for sure but I get loads of estates where the legacies were subject to tax and the tax has to come from the legatee. It sucks and it's almost always because the testator didn't have that fully explained.