Reasons to choose Wilson Browne
If the value of your parents’ estate is below the Inheritance Tax threshold of £325,000 or £650,000 for married couples and civil partners where the full allowance is transferred to the surviving spouse or civil partner, then there will be no Inheritance Tax payable whether or not there is a house.
If the value of the estate is above that amount, you may have to pay tax on the part that is above the threshold of £325,000 or £650,000 at a rate of 40%. If you are concerned about a potential Inheritance Tax liability then there are measures you can take to reduce or avoid the Inheritance Tax.
When inheriting a house from your parents, it is important to note the Residence Nil Band (RNRB) which was introduced in 2017 and reduces or potentially eliminates the Inheritance Tax liability against a home. The RBRB is currently worth an additional £150,000 (£300,000 for a married couple or civil partners) and will rise to £175,000 in the next tax year (£350,000 for a married couple or civil partners). It will then rise in line with inflation from 2021 onwards. This means that a person who owns a home and leaves it to their child or grandchild in their Will currently have an exemption of £475,000 before any Inheritance Tax is payable.
For married couples and civil partners the amount doubles to £950,000, although the Residential Nil Rate Band allowance tapers down gradually if the value of an estate exceeds two million pounds.
It should not matter if your parents are divorced in terms of inheriting a house from each of them. Each of their estates will be able to take advantage of their own individual tax allowances.
Whether you are a parent or a child who has been bequeathed an inheritance it does pay to take professional advice to potentially minimise your tax liability.