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IHT Downsizing Relief - how much is due?

Client is downsizing - confirmation of the Downsizing Relief would be helpful

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My client is a widower.  He has an Estate currently around £1.3m - house £750K, farmland £350K, cash/investments £200K.

My client will be entitled to a Nil Rate Band of £325K and a balance from his late wife of £88K.  He will also be entitled to a Residents Nil Rate Band (RNRB) of £350K - his own of £175K and a further £175K from his late wife.

His Will leaves his estate 50/50 to his son and daughter.

He is considering selling his house, and the farmland and buying a new home for £300K.  He will gift the resultant total cash (which after costs and CGT would be about £950K) to his children.  he is happy that his income is sufficient to provide for him for the remainder of his life.

If he was then to die within a very short time frame, leaving the remainder of his estate to the Children, is it correct that the RNRB would be £350K, rather than the lower £300K reflecting the value of the home he owns at the date of death?

The Downsizing Relief calculation seems to suggest that the lost additional threshold is £50K and that as the estate passes entirely to the children, does that not mean that the RNRB will be £350K.

Any thoughts, clarifications etc would be gratefully received.





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