Inheritance Tax: Seven Ways to Save Thousands on HMRC Inheritance Tax Bill | Personal finance | Finance
Although it is well documented how to reduce the amount of inheritance tax Britons have to pay before a loved one dies, people often overlook what can be done after they die. Huge savings can be made if taxpayers follow the right advice.
Britons can apply for a 5% discount if the property has tenants on site.
If the property is occupied by short-term tenants for a year or less, HMRC will usually accept a five per cent discount on the total value of the property.
If the tenant has signed a commercial lease or has a longer fixed-term lease, the deductions can be higher than 5%.
However, many people do not take advantage of this easy-to-earn tax savings.
Other factors that can affect the amount IHT family members pay include whether the property was jointly owned at the time of death.
Mr Green continued: “Section 18 of the IHT Handbook allows an additional deduction of 15% of the deceased’s share of the property, if at the valuation date a co-owner was still occupying the property as their principal residence.
“If the co-owner(s) did not occupy the property as their principal residence, the discount can still be up to 10%.”
If the property is jointly owned by a company, a discount on the deceased’s share of up to 20% may be applied depending on whether the deceased owned minority or majority shares.
Seven questions people need to ask themselves are:
1) When was the property appraised?
The value of the property on the date of death may be much lower than the current market value or any estate agent assessment.
2) Is the property rented?
Many areas are missing out on this easy-to-win concession.
3) Are there any major defects in the property or missing security certificates?
If at that date of death the property suffered from defects such as subsidence or high humidity, even if these defects have now been repaired, these elements must be taken into account when assessing the value.
4) Was the property jointly owned on the date of death?
The discount can be up to 10%.
5) Is the property owned by a company?
Again, a reduction on the deceased’s share must be applied, up to a maximum of 20%.
6) Are there any neighborhood issues affecting the property?
A neighbor’s planning request may have a negative effect on the value of the
7) Is the property in a block of flats?
This could lead to additional expenses if work is in progress.