Inheritance Tax

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Be glad you have the money to generate this tax liability. This is my reaction in a similar situation.

My understanding is that for a single person the inheritance tax threshhold is now £500,000 and for a couple £1 million. In your case, I believe that means tax is payable on 350,000 at 40%.

I believe that inheritance tax is one way of re-distributing wealth. It's not as if your children would be left destitute. I would hope they would be very appreciative of a share of £500,000, or even £325,000 - I'm sure most people would be.

Have you consulted a solicitor? If you don't want to pay for the advice arrange a meeting with one of the companies that specialise in wills. We used a company that regularly has a stall in our local mall. They will give you advice for free. You only pay if you ask them to draw up the will and set things in motion. There are things that can be done to protect your children's inheritance.
I know to those people who live out of London that those of us with houses here look wealthy but for many of us the house is all we have because we had to struggle to buy it and we paid back our mortgages at 15% ( if you remember those times). Our daughter is of an age when I had children going to university but she still lives with us as she is unable to buy a one bedroomed flat on her salary.

Err....! Just why should hard earned "wealth", already taxed once, have to be "redistributed"? How do you know how much the OP already gives to charity? Why sound so unpleasant to someone who has obviously managed their finances fairly well in life, has never been a drain on the state, and now wants to pass on what they have to their offspring. Inheritance Tax is an unfair tax.

Shall we have no sour grapes please?

Well said that woman!

My advice is, get a good financial adviser, and then spend as much of it as you can.

Humbertbear I can certainly remember the 15% interest paid on our mortgages. I was not aware that the inheritance tax threshold had jumped to £500,000- I thought that it was still at £325,000. I never have and never will pay tax at 40%. My house is not worth half a million but the way that prices are rocketing in London- who knows? For the size of it, it certainly is not worth it.

My parents have taken out some sort of insurance or indemnity (?) policy to cover Inheritance Tax, would that be an option?
They did it some time ago so not sure if you can still do that.

And how do we know the OP won't be leaving a decent amount in her will, to a charity of her choice?

Sorry. I realise the money is tied up in your house and you may not be able to afford professional advice.

Is selling the house now and moving not something you would consider? If you are really attached to the house you may well wish to remain but selling could release capital that you could redistribute a bit now and also annually - you can give so much each year to children with no tax payable but I don't know amounts. I think there are a few options but at that price presumably the house is quite a large one. Have you discussed possibilities with your children?

In recent years, house prices have been going up, depending on the area in which a property is located, at somewhere between 8% and 20% a year. That increase is not because individual homeowners have worked much harder than non-home owners but because when there is high demand and short supply prices go up. So, in reality, this has been a windfall to some which cannot in truth be described as "hard earned". (In case somebody accuses me of "envy" - I speak as one of the many homeowners whose home has rocketed in value.)

To my mind, it is wrong that people who own valuable properties and who have benefited enormously, and with no especial effort on their part, from huge rises in their property values, should object to paying inheritance tax. More and more "hardworking people" can hardly afford to pay extortionate rents and have almost no chance of owning their own homes, despite being in reasonably well paid and secure jobs.

If I were you, FreeSpirit, I'd move out of London and encourage your family to do the same.

You could then afford to buy a beautiful new home in a much better environment and give your son and daughter enough money for each of them to buy outright.

As long as you survived for seven years (and at 65 your chances are quite good if your health is OK) then they would not pay tax on your generous gift.

We are 40% tax payers and really do not want to put any more into the coffers. We are looking to set up trust funds for GC and also pay their school fees until they are eighteen. In our case, as a couple, inheritance tax would only become liable when the last one dies, and I hope to have spent most of the money by then

I must say I'm quite happy for my children to inherit from whichever of us dies second, after inheritance tax has been paid. Too much effort to avoid what might becomes would make me feel a bit Google-ish!

It is a pity that inheritance tax starts at 40% - many people would be more willing to accept it if it started at a lower rate.

Eloethan I'm surprised at your largesse regarding who inherits the value in your house! I'd much rather mine went to my children rather than in taxes.

It's not quite right to say that through no special effort have homeowners in certain areas benefited from a windfall price increase.

Like me, I'm sure you have friends outside London/South East who over the decades have lived in much grander properties bought at much reduced prices, had more disposable income, enjoyed cheaper restaurants, theatres, etc by virtue of not living in London.

We (people like you and me!) paid a price over the past 40 years, which has now come to fruition.

Riverwalk I am still of the opinion that £500,000 is more than enough money for family members to inherit and that anything over that figure should attract inheritance tax.

I have lived in areas outside of London, including in Blackburn and Colchester, where property is very much cheaper. However, what I earned there was about half of what I earned when we moved to London. For public service workers who earn roughly the same wherever they live this can be both an advantage and a disadvantage, depending on whether they live in a "cheap" or an "expensive" area.

Even with interest rates at 15%, when both of us were working in London, we had a much more comfortable lifestyle.

I accept that we have both worked hard, although I have mostly worked part-time, but many people are also working extremely hard these days and yet more and more of them can hardly afford rent, let alone a mortgage. Is it too much to ask that a percentage of the gains homeowners have made be returned to the State to help fund all the things that a civilized society needs? (Though I also think most people would be keener to pay their taxes if they thought the very wealthiest among them were paying theirs). Inheritance has been found to be a major factor in preserving inequality.

I want my children/grandchildren to benefit from most of the profit we have made, but not all of it. Why is that surprising?

Perhaps a vote for Brexit would solve the problem. Then the house would be worth less than 700,000 so less tax to pay.

Iagree with you, Eloethan about people paying their taxes.
One of the biggest causes of the rise in house prices in London is the fact that many companies outside London buy up properties as a way of saving. They do not pay tax on the purchase because they do not live here.

www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band
If you leave a main residence to your descendants there is an additional nil-rate band which is increasing over the next few years, so they would not be paying IHT on as much as £500k Freespirit

One thing to beware of is that the tax is payable before probate is granted, ie the beneficiaries can find themselves in the position of having to pay the tax before they have the money to pay it with, IYSWIM.
That is the purpose of the insurance policies mentioned by loopylou I think.

Eloethan- was going to post- but you've said exactly what I would have said, only much better. Exactly how I feel. Our kids will get a good inheritance when we go- but it's only fair that part of this will be shared with the community in the form of taxes. Fair, I think.

That is such a lot of money to most people Freespirit, most of us work really hard all our lives and can never amass that much, agree with Eloethan, lots of very hard working people cannot afford to rent, so agree with inheritance tax.