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Avoiding Inheritance Tax on Your Home

Avoiding Inheritance Tax on Your Home

This is a difficult one to achieve but it is possible.

If you are willing to downsize your home in terms of value and gift away any money generated (preferably using a lifetime trust arrangement) that will work provided you live 7 years after the gift has been made.

However, what happens if you love your home and prefer to remain in it long term? Most people do not wish to upset their own lives merely to save their children some tax.

The simplest method may seem to be to gift your home to your children. Simple, but fraught with danger and so best avoided. Should your children get divorced or become bankrupt you may lose your home as part of a legal settlement.

You could gift a proportion of your home.  Same problem as before but not quite as risky. In addition, you will have to pay rent at a commercial rate on the proportion given away to satisfy the HMRC that a gift has actually been made in reality. Capital gains tax will also be payable by your children on the gain in the proportion gifted to them. If you gift part of the house in your early 70’s the capital gains tax bill could be large. However, there are better methods.

Depending on the value of the house and the value of the estate we can suggest different methods of mitigating the tax.

Yes, the methods involved can be quite complex but let’s face it you are trying to legally avoid tax. HMRC is not going to make it simple to do otherwise everyone will do it. However, for those of you with a large and valuable house, the planning is not that difficult for an experienced Inheritance tax planner. Errors in this planning can have huge financial implications.

Call us or email us for help if you want to avoid inheritance tax on your home. We are always happy to chat about any issues with potential clients.

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