Inheritance tax

[BorgQueen]

I’m pretty sure I’m correct but I can’t find anything unambiguos online to back me up.
I have friends/neighbours who are an unmarried couple, they jointly own a house worth around £450k, they are early 50’s with no mortgage, both NHS with DB pensions, not sure about savings, no wills and the Woman has one adult DD.
They do not believe me when I try to explain that IHT will be due on anything above £325k if one of them dies, both absolutely believe that only half the house value will be counted - they are definitely not tenants in common ( I’ve even checked the LR to be certain).
Nothing I’ve said about jointly owned property being owned as a ‘whole’ has got through to them.
Legal websites I’ve looked at state IHT will be payable but in very vague terms, nothing I’ve found mentions the whole value of the property as concrete evidence.

Not being married means they cant share their IHT with each other. Their daughter could have a bill when they die whereas they could've passed one lot onto the other and not had any bill. They need to get legal advice.

Assuming a joint tenancy, the property automatically passes to the surviving party regardless of the will. But it's still valued as part of the deceased's estate for IHT - their half share that is. But of course, the entire house value will form part of the estate when the survivor dies as they'll have originally owned half and then inherited the other half. The survivor, however, won't benefit from the deceased's transfer of unused IHT nil rate band, so the survivor could well end up with an IHT liability (their estate) whereas there may not have been an IHT had they been married or legally partnered due to the nil rate band transfer.

There is no ‘half share’ of a jointly owned property, that’s the whole point of my post.

The surviving partner will have IHT of at least £50k to pay, unless I’m very mistaken.

That’s why I’m looking for a concrete example/ evidence.

They are idiots.

It's none of your business.

Butt out.

If I find concrete evidence that I’m right then I’ll show them then bow out.

They are adamant because someone they work with told them. I may be wrong, that’s why I need to be sure. For some reason they thought it hilarious when I suggested civil partnership as a means to financial protection.
It is my business because they asked me questions about inheritance etc. knowing I’ve not long done probate for a relative.

They're right. The surviving partner will be treated as inheriting half the value of the house, not the whole value, even though they are JTs. In fact, you can actually discount the value by 10% to take account of the fact that the open market value of a share will be less than half the value of the whole thing. See the notes to IHT400 here https://assets.publishing.service.gov.uk/media/66f6bb42e84ae1fd8592eab5/IHT4002022_Notes.pdf (under 'how to value joint property').

Provided that half the value (less 10%) plus whatever else they have is under £325k, no tax. (It would still be beneficial to be married, however, as it would allow the survivor to inherit the allowance.)

If I find concrete evidence that I’m right then I’ll show them then bow out.

You aren’t right, though. This is from https://www.gov.uk/valuing-estate-of-someone-who-died/estimate-estate-value#:~:text=If%20land%20or%20property%20was,of%20the%20person%20who%20died

Example
The deceased owned a property as a joint tenant with 3 other people. The property is worth £200,000 on the date they died, giving them a £50,000 share (£200,000 divided by 4).
After 10% (£5,000) is deducted from the deceased’s £50,000 share, the final value is £45,000 (£50,000 - £5,000 = £45,000).

Oh, cross-posted with @ChinUpDandy!

Thank you. I’m pleased to be wrong.
I was just starting to check on Gov . Uk and hadn’t got to that bit.
So actually, unmarried couples can have joint property worth around £700k before having to worry about IHT, good to know.

As ever with hmrc, the waters are muddy.
Joint property is a whole, unless it’s not🙄

Apart from not be able to transfer the inheritance tax exemption there is also the problem that the woman's daughter - and the man's siblings - will inherit their possessions. This means that the survivor may have to pay to keep some or all of their furniture, a car, anything that could be said to be jointly owned. They will have no right to anything paid for wholly by the other partner. It will also take longer to sort out their estate.

They are also getting older and their partner can not take medical decisions for them.

They really should take legal advice. They need to at least put wills in place and consider who takes medical decisions for them if they are, for example, badly injured in an accident.

Both NHS psychiatric nurses, you’d think they’d know better than most of tbe potential consequences. I think I persuaded them about wills, I got them to witness ours.

I can't believe how invested you are in this. Perhaps they have their reasons for not being married? For example if the woman had a load of savings and a much better pension than the man she might decide it's worth not getting married to prevent him from having a right to her money.

Whoever inherits the house after the second death will still receive a huge amount after IHT so they'll just pay the bill or take out a relatively small mortgage if they want to live in it. I don't see the issue.

If the man dies first the woman will be able to leave £599k to her Dd free of IHT because you get an extra £175k allowance if you leave your main residence to a direct descendent.

They could sever the joint tenancy and change to owning as Tenants in Common, then each leave their share to whoever they like in their Will. The man would be able to leave his step daughter £325k worth of his share of assets / half the house , and the woman £500k. They would need to leave a Life Interest in the house to enable the survivor to continue living there, even though it had been left to the Dd (or the man’s niece or whatever).

The info for all this is on the Gvt website

https://www.gov.uk/joint-property-ownership

and

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

Unmarried/Divorced couple own a house. One dies, the other automatically inherits the deceaseds half the house, but owes inheritance tax on it? And would have to sell the house they live in, to pay the tax?!