#AskAdam – Question 1 – IHT

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Q.

Hi Adam, love all the information you give and thank you so much.  So my question is about inheritance tax.  My Grandmother is 97 and my Mum is her only beneficiary.  My Grandmother’s house which she owns outright with no mortgage is worth roughly £460,000.  This is obviously below the £500,000 inheritance tax limit for property but when my Mum inherits the house are there any other taxes we should be aware of.  And if she sells the house a few years after her death would she need to pay capital gains tax as this would be her second property?  Thank you so much for your help in advance.  Beth

A.

Hi Beth, thank you for the question.  Go Grandmother, 97 is fantastic!

So, first thing I would mention is just to be careful with the £500,000 inheritance tax nil rate band.  This is made up of a £325,000 main nil rate band and a £175,000 residence nil rate band.  The £175,000 is only for property passed to direct decedent’s, so should apply for your Mum. 

I’d suggest you review the overall estate, as personal possessions and cash in the bank may push your Grandmother above the allowance.  Use this Gov link to estimate her estate value – https://www.gov.uk/valuing-estate-of-someone-who-died/estimate-estate-value.

The answer to the main part of your question is that you don’t pay income tax or capital gains tax on property you inherit, when you inherit it.  

However, there could be future tax to pay depending on what your mum decides to do with the property.  When she inherits the property she would need to nominate one of the two houses as her main home (this needs to be done within two years).  The other house would then be classed as a second home, which would be subject to normal second home rules.  That means that any profit she makes on the second home could be liable for CGT. 

There could be ways to offset expenses or losses so I would suggest you speak to an accountant.  Also speak with a financial advisor if there are any complications regarding inheritance tax and estate value.

Thanks again for your question.

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