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IHT: Silver lining of a falling market

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Mark McLaughlin, co-author of Ray & McLaughlin’s Practical IHT Planning, highlights some key reliefs available to use when calculating inheritance tax after a death.  

26th Jun 2020
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Sadly, tens of thousands of people in the UK have lost their lives during the Covid-19 pandemic and about 5% of those deaths will result in an inheritance tax (IHT) charge.

IHT is charged on the estate of a deceased person as if, immediately before their death, they had made a transfer of assets, valued on that day.

Loss on sale  

Where an asset was gifted within seven years before death, the IHT payable in relation to property may be reduced where the value of the gift has fallen between date of the gift and death. The IHT is calculated as if the lower value is substituted.

Example

James gives an investment property to his daughter Sammy in October 2018, which was then worth £300,000. James died in May 2020, when the value of the property had fallen to £250,000. This value can be substituted for relief purposes.

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Replies (1)

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paddle steamer
By DJKL
27th Jun 2020 13:24

Mark

Have you thought about what market values actually were whilst everything was in lockdown, effectively there were no actual physical viewings, conveyancing was effectively suspended, there was no functioning market in property, so how ought values be considered under these market parameters?

Interested to hear your thoughts (appreciate it is likely more a question for surveyors)

Thanks (0)