Mortgage

Hello Pati,

Thanks for getting in touch. I’m sorry to hear about your spouse’s diagnosis.

Just to say we’re not regulated to give any Financial Advice, but I can explain some key information to be aware of regarding inheritance tax (IHT) and financial planning which I hope will help you.

Everyone has a tax-free allowance in relation to inheritance tax called the Nil Rate Band (NRB). At the moment this is £325,000.

An extra tax-free allowance might be available if someone leaves a residential property, which has been their home at some point, to a direct descendant on their death – this includes leaving the property to their children (including stepchildren, adopted children or foster children) or grandchildren. This additional nil rate band is added to the initial £325,000 allowance. For 2022/2023, the additional amount is £175,000 (effectively increasing someone’s NRB to £500,000).

If someone has a large estate (worth more than £2,000,000), the additional nil rate band will be tapered at a reduction of £1 for every £2 over the threshold. This means that some very large estates won’t be eligible for the additional NRB.

Usually there’s no inheritance tax payable on anything that is left to a spouse. So, if the will is leaving everything to a spouse, whether a property is tenants in common or a joint tenancy, won’t matter for IHT purposes.

Something to be aware of is the possibility of the transfer of the unused NRB to the surviving spouse, this means if the will leaves everything to the spouse, none of the NRB would be used, meaning the tax-free threshold for an estate when the second partner dies would be £650,000 (2022/2023 tax year). The person sorting out the surviving partners estate would have to apply to transfer this by completing the relevant forms.

It’s also possible to transfer the additional nil rate band (for those with a residential property) which could potentially increase the joint allowance to £1,000,000 (2022/2023 tax year).

You can read more on inheritance tax via the link below;

http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

This can be a lot to think about, if you have further questions and would rather discuss this over the phone you can give us a call on 0808 808 0000. To reach the Financial Guidance team just select options 1 then 2 then 1 again. Our team are available Monday to Friday 8am – 6pm.

IHT is a complex area, a financial adviser would be able to advise on planning around inheritance tax. I have included some details below about finding suitable advisers.

Find a Financial Adviser by asking family and friends for a recommendation or by visiting: www.findanadviser.org/find-an-adviser.aspx

Tell the adviser what’s needed e.g., advice on inheritance tax issues following a cancer diagnosis. The Financial Adviser should arrange a meeting to discuss these needs and do a fact-finding exercise (this is where they ask questions about finances and personal situation). Their next step is to research options and put together their recommendation.
 
MoneyHelper also have some useful websites and tips for choosing a Financial Advisor. Please access the link below for more information:
 https://www.moneyhelper.org.uk/en/getting-help-and-advice/financial-advisers/choosing-a-financial-adviser
 
When choosing a financial adviser; always check that they, and the company they work for, are authorised by the Financial Conduct Authority (FCA).
 
It’s possible to check individuals and companies on the FCA register:
 https://register.fca.org.uk/s/
 
To speak to the FCA directly, phone 0800 111 6768 from 8am to 6pm, Monday to Friday (except public holidays), and 9am to 1pm Saturdays.

Just to clarify, the Financial Guidance Service can provide information and guidance on all aspects of your personal finances to help you make informed decisions in the following areas;

Pensions and retirement options

Questions about insurance policies

Mortgages and money management

Arranging wills and trusts to protect your family

General financial planning questions

If there is anything further from the above list that you would like to discuss, please reply to this message, or speak to us directly on the above number. 

Kind regards.


Chris H
Financial Guide