For TonyTax please:Inheritance Tax query:I have a query on behalf of a relative, their potential inheritance tax liability and the best way to offset that.The situation is as follows: there is a brother, sister and their mother. There are also two properties.Property 1 - no mortgage, value approx. £160k, owned solely by mother, rent income of £10k pa pre-taxProperty 2 - value approx £160k, mortgage of £126k (only in mother's name), owned jointly by mother and sister although mother only entitled to 10% of beneficial interest, rent income of £9k pa pre-taxMother now retired, brother and sister both work in jobs earning £30-40kQuestion: Mother has a will, in which everything she has is left equally between her two children. What is the best way to minimise any inheritance tax should the mother pass away in the future? Is it best to transfer any of the properties to her children's names at this stage, bearing in mind any income tax liabilities, or hold off and let everything stay as it is?Thank you
System of Law: England-and-Wales
Hi.Can you tell me how much each property cost to buy please. If property 2 is sold for £160,000 , how would the proceeds be split bearing in mind there is a mortgage? Roughly, what is the value of the mother's estate now? What age is she? Is she widowed, separated or divorced?
HiCan you tell me how much each property cost to buy please. Both were around £130k eachIf property 2 is sold for £160,000 , how would the proceeds be split bearing in mind there is a mortgage? Everything needs to be split equally between the children and the house may not be sold. So they will try to transfer the mortgage and make whatever adjustments are necessary to ensure they have an equal share in the property's interest.Roughly, what is the value of the mother's estate now? What age is she? Apart from the two properties, there will be some cash, not much maybe £20k. Also tiny shares in property abroad (very minor so may not even be worth including).Is she widowed, separated or divorced?Divorcedthank you
Thanks.If the mother's estate is worth £325,000 or less in total, then there will be no Inheritance Tax when she dies. The children would inherit the properties and their base cost for CGT purposes would be their respective probate (date of death) values. What you need to consider is the potential for growth in the value of the properties bearing in mind the mother's age and life expectancy. If the mother does not have a high income, it would seem to be silly for her to give the properties away with the potential Capital Gains Tax consequences for her and a reduction in her standard of living at the same time.If I have the figures right about the mother's wealth and income, there would seem to me to be nothing to be gained by her giving away the properties now.Let me know if you have any further queries.
Thank you. I will have to confirm with the person that asked this if it is all they need. Will be back tomorrow. Thanks for now
Hi, thank you I think that is all in relation to this query as it appears the whole estate will be considerably less than £325,000. If you don't mind can I please ask a very quick tax question that should hopefully have a straightforward answer - if a person receives a payment for an invoice a few days before the end of one tax year, which if declared then would result in a higher tax liability, can this payment be declared in the following tax year when the person's income will be much lower than compared to the previous year?Thank you and will of course accept your advice shortly
In an individual has a 5 April year end and receives payment for an invoice issued on 31 March, the invoice date determines which tax year the payment falls into even if that money was received on 7 April. The invoice date determines the tax point. If an individual works on a cash accounting basis then they account for what they have actually received and paid out during the accounting period.
Inc Tax, CGT, Corp Tax, IHT, VAT.
thank you, much appreciated
Thanks for accepting my answer.