Twitter Facebook RSS FEEDS

Inheritance tax warning for holiday homeowners

Monday, 18 August 2008 12:00 AM

Owners of holiday homes are being warned that their place by the sea could become an inheritance tax (IHT) burden for offspring.

There are some 350,000 second homes in the UK and some 260,000 people own homes abroad.

For a married couple, the current IHT limit stands at £624,000 - so wealth management law firm, Moore Blatch, is urging people in their 60s and 70s to take action.

The firm advises that the IHT liability could be eradicated if they gave their home to their beneficiaries now and paid the commercial rent to use it.

Subject to living seven years, the whole of the IHT is saved. The only tax that could be paid is income tax by the beneficiaries on the rent paid for the time that the property is occupied which is often just a few weeks or months a year.

Andy Kirby, senior tax and trusts manager at Moore Blatch, said: "Property is notoriously hard to give away for the purposes of IHT planning as it is a single asset that is difficult to give away piecemeal.

"However, by setting up a suitable trust, all the IHT can be saved (subject to seven years' survival) and there is no pre -owned asset tax as a rent is paid for the use of the asset. The rental income stays with the beneficiaries so the tax-man's cut is effectively wiped out."

He suggests placing a home in a trust and then paying commercial rent to the trust for the weeks that it is in use.

The rent paid to the trustees can be used to discharge the running costs of the property and any surplus can be distributed to the beneficiaries.

Assuming a £300,000 property the IHT bill is £120,000, data from Moore Blatch show.

However, if it were rented for three months per year at five per cent rental income, the income tax bill after 10 years would be just £15,000, assuming it was paid by a higher rate tax payer - a saving of £105,000.

If the beneficiaries were non tax payers the saving would be £120,000.

Related stories

Inheritance tax warning

Inheritance tax warning

Inheritance tax warning

 Flood warning system updated.

Extended flood warning system 'good news for homeowners'

More homes will be added to the body's flood warning system from the end of this month.
Abolition of stamp duty and reform of council tax tops list of recommendations from Mirrlees Review. Image: Thinkstock

Review calls for property tax shake-up

Abolition of stamp duty and reform of council tax tops list of recommendations from Mirrlees Review.

Holding cigarette above ashtray

Warning: smoking can seriously damage your wealth

Research shows buyers and renters think twice about moving into property previously occupied by smokers.
Experts warn of "near-paralysis" were the crisis in the Eurozone to deepen. Image:Thinkstock

Mortgage lending falls as stamp duty holiday ends

Underlying picture still relatively buoyant, says CML, but Eurozone crisis poses threat to housing and mortgage markets.

 The average price of a home in the UK is down just £5 this year. Image:Getty

End of stamp duty holiday triggers price fall

House prices fell 2.4 per cent in April, wiping out gains made in March, says Halifax.
MPs warn of the risk of people falling into negative equity on the NewBuy scheme.

MPs sound warning on NewBuy problems

Commons committee worried that guarantee scheme could restrict mortgage supply in rest of market and lead to negative equity.

 Inheritance tax changes will have little impact

Inheritance tax changes will have little impact

Inheritance tax changes will have little impact

Row of terraced houses in London

Homeowners sitting on valuable equity

Borrowers hold unmortgaged housing wealth worth around £800 billion as most homeowners’ houses are worth more than their mortgages.

 Now might be the right time to invest in a holiday home. Image:Thinkstock

How to make property pay with holiday lets

There are several ways to make investment in property pay, even in the current climate. Mike Fleming, tax director at Straughans Chartered Accountants, explains how.

Search property

Headlines

Directory

Alaris

Alaris Logo
Alaris specialise in quality Bathrooms and Kitchens along with many other unique products for your home. The range of kitchens, kitchen worktops and bathrooms is extensive and the highest quality so you are sure to find what you want. New bathroom furniture, bathroom suites, taps, showers and cabinets are added regularly.

Bathrooms365

Bathrooms365 Logo
Bathroom365 supply all areas of your new bathroom - leading-edge designed bathroom suites, stylish bathroom taps and showers, all styles and forms of shower enclosures and a vast collection of bathroom furniture.

Fitmykitchen

Fitmykitchen Logo
Fitmykitchen are specialist suppliers of kitchen appliances, sink taps, waste bins and furniture. So whatever you want from kitchen sink taps to waste bins look no further than fitmykitchen, UK, the specialist suppliers of kitchen appliances, stainless steel sink taps, waste bins and kitchen furniture.

MyStampDuty

MyStampDuty Logo
We help people buying property all over the UK to minimise Stamp Duty Land Tax on residential and commercial property. If you are looking at purchasing a new home or business premises over £500,000, contact us today by completing the form on the right

Oak Furniture Land

Oak Furniture Land Logo
For hardwood furniture, including Solid Oak, Mango, Mahogany, Sheesham, Acacia, Ash and Birch, look no further than Oak Furniture Land.

Rated People

Rated People Logo
Whatever type of home improvement or garden remodelling project you have, Rated People can help you to identify the right tradesmen for the job in a way that is quick, easy, convenient and, as it is based on real-life recommendations, trustworthy.

Residential Land

Residential Land Logo
If you are looking for short or long term rentals in Central London, Residential Land have a portfolio of over 1200 flats and houses in the best postcodes across the Capital.

Simply Bedrooms

Simply Bedrooms Logo
Simply Bedrooms, a part of Sleepwell Bedrooms Ltd, supplying quality beds, wardrobes, sliding door wardrobes and bedroom furniture at low prices and great service, London and Home Counties Specialists.

Door Handles UK

Door Handles UK Logo
Door Handles UK is the UK's largest online range of Door Handle accessories, Door Hinges, Locks and Latches and so much more and all at genuine internet prices. We have a wide range of Chrome, Brass and Glass Crystal Mortice door knobs in both traditional and contemporary designs, whatever your taste and budget you will find a design to suit.

Woodlands Furniture

Woodlands Furniture Logo
We are an established family business situated in rural Herefordshire specialising in beautiful handcrafted classic reproduction furniture. Our comprehensive ranges are readily available from stock.

WowBBQ

WowBBQ Logo
Welcome to the World of Weber. We are the largest independent online Weber BBQ retailer in the United Kingdom. WOWbbq.co.uk is a Weber Partner Store and can give you the best advice for all your Weber BBQ needs.

Join our directory aboutproperty.co.uk

Twitter

Join the conversation at #aboutproperty

Directory articles

A guide to finding the right kitchen sink

When redesigning a kitchen or giving the room a makeover, it is important not to forget about the less obvious aspects of the space. Kitchen sinks are an essential fitting, but often overlooked, despite the fact there is a wide choice of styles available.

Useful tips to help find a flat in London

Looking for flats in London can be a frustrating process, given the capital's size, demand for rental accommodation and varying prices. It is vital, therefore, that you do plenty of research and act quickly to ensure you get the place that you want.

What do you need to consider when buying a mattress?

If you looking for a new mattress, you need to get the decision right, as getting it wrong could impact on your overall health and wellbeing. As well as comfort and size, you also need to consider other points, such as any health issues you may have.