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Original poster

Potential inheritance tax

7 replies

spanieleyes · 22/10/2023 08:46

When I divorced I received all the equity in the family home ( and a generous maintenance sum) on the understanding that everything would eventually go to our two children. But nothing in writing, he just handed it all over! I sold the family home and now have a property completely in my name and with no mortgage, worth around £300000
I am now planning to retire and downsize. I would like to give my children a lump sum from the profit in the house before buying a small flat locally, so they could use it as a house deposit ( one rents and the other still lives with me but is looking to buy) I am thinking of giving them £25000 each. This would still leave me around £100000 after buying a flat and this, together with my work and state pension would last me more than comfortably. If I did need residential care in my older age, I could sell the flat and use the proceeds for a number of years.
Morally I view this as " their " money as it is , in effect their dad's . But legally it is all mine!

Are there any tax implications or issues? Presumably I would have to aim to live a further 7 years! Does the fact that my estate is currently less than 3250000 have any implications for the future?

OP posts:

BookWorm45 · 22/10/2023 08:48

this might help you: https://www.gov.uk/inheritance-tax

How Inheritance Tax works: thresholds, rules and allowances

Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.

https://www.gov.uk/inheritance-tax

Original poster

spanieleyes · 22/10/2023 08:53

Thank you!

So, even if I do die within 7 years ( I hope not to of course but you never know!) as long as my estate is below the £325000, my children won't be required to pay inheritance tax. Is that right? Even if I give them more than the gift threshold?. I could possibly give them the £25000 over a number of years to stay below the £3000 limit but I really want them to use it for a house deposit now!

OP posts:

messybutfun · 22/10/2023 09:43

Relief is also available when you have downsized, so your estate would benefit from the residential nil rate band of up to £175k as well if you leave the funds to your children.

If the total of the estate plus gifts made within the last 7 Years is below the total available allowances, there‘s no Inheritance tax.

Original poster

spanieleyes · 22/10/2023 10:25

Thanks all. Now all I have to do is retire and sell my house!

OP posts:

Chewbecca · 22/10/2023 10:29

If they don't need it for a house purchase right away, consider putting it gradually into LISAs for them. It can only be withdrawn for house purchase or retirement.
Beware of the limit on the house value though, it's too low for many people if they make a joint first purchase in an expensive location.

caringcarer · 22/10/2023 10:42

You can give your DC £25k each and providing you leave less than £325k they still won't pay inheritance tax.

Original poster

spanieleyes · 22/10/2023 10:43

Both want to buy soon, the eldest is getting married next year and, as the youngest still lives with me, he will need to move out when I downsize. Thankfully we live in a " cheap" area and we won't have any issues buying somewhere we like. The £25 000 deposit will be a bonus!

OP posts:

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