7 year rule and iht

[Sparks1234]

Hi I wondered if anyone could help answer my queries who has probate expertise please??
My in laws gifted my husband a percentage of a house they owned (a 2nd home so not primary residence). 6 months later he and I bought them out of the remainder, so we then owned 100%. That was 5 years ago and his father is now quite ill. We are concerned he will pass away and had a thought that we will have to pay inheritance tax under the 7 year rule (obviously on a reduced scale as was gifted 5 years ago). I think the only assets FIL holds is his main residence. So queries are…

1. could our tax liability be covered by his iht allowance? Or does this impact MIL?
2. As spouses iht allowance carries over to each other, would the liability not need to be calculated until MIL passed away?
3. Is the 7 year date calculated from when the first percentage was gifted, or from the later date when we purchased the remainder? (He didn’t live in the house at all).

Any help appreciated, thanks very much!!

It is only FILs Estate that will have a IH tax liability not you.
£3000 value will be exempt providing he did not gift any other amounts the same year.
Runs from the date of the gift.
No tax consequence for you buying out the balance providing you paid market value.
Liability will be calculated on sliding scale attached.

Great, that’s a relief, thanks for your response !
Yes we paid market value as I had an official valuation done.

What you bought from him doesn’t matter. As long as it was market value. The gift will be taxed as per the schedule. If tax is payable by his estate.

Assuming FIL and MIL are married and he's leaving her the marital home and his savings the gift to you won't affect her at all because no IHT is payable between spouses.
The gift to you, tapered down for five years, will presumably be covered by his nil rate band and will mean that there is less of it to be passed on to MIL's estate when she eventually dies.

Thank you both, that’s very helpful!