Inheritance tax sparks rental crisis as landlords hit by frozen thresholds

My properties are mortgage-free. If my Estate had to pay IHT, the benefactors could take a mortgage on one or more of the properties.

However, my benefactors have said that they do not want to become landlords when I die. This is a far greater problem for my tenants as I need to sell up before I go. If I don’t sell up then my tenants are likely to be evicted in the months following my death.

Of course, if landlords (or their Executor) sells a property or two, the impact on the housing crisis is marginal. For each private rental property sold, there’s one empty home for someone to buy.

It’s our responsibility to monitor IHT rules and take the necessary steps to protect our family’s wealth.

Reply to the comment left by Cider Drinker at 16/12/2024 - 10:07
Genuine question, will they be able to mortgage a property because technically, they won’t own it until probate is granted.

Is IHT payable before probate is granted?

Chicken and egg scenario?

Reply to the comment left by Cider Drinker at 16/12/2024 - 10:07
Cider Drinker: Surely if you sold you would have CGT. If I sold, I would have a huge CGT bill. Then if I died the rest would be subjected to Inheritance Tax. I'm determined to keep my properties till I die to try to avoid at least one tax. As I said to an account: 'I might die of'em but I'm going to die with'em'.

Reply to the comment left by Yvonne Francis at 16/12/2024 - 10:27
Might be better to take out big mortgages on the properties and then gift the money raised and hope you live 7 years OR take out a 7 year reducing term life insurance policy to pay any IHT bill on premature death, written of course in trust for the beneficiaries so that the life insurance payout does not form part of the estate.

By reducing term I meant of course a reducing amount as after 3 years the IHT percentage rate starts to drop.

Do we have ourselves to blame , The Government decided to rob us by Taxing us on turnover not profit . With no resistance.

The Councils Rob us with Selective Licence scams . and no resistance.

The Government now want to rob us when were Dead by Taking 40% of our hard earned. And then Taxing the Beneficiaries again for the income. And so far no resistance.
What is the point of the NLA ?

Reply to the comment left by Dennis Forrest at 16/12/2024 - 10:40
Hi: I've thought of that as I can get equity release on my own home but there is tax on gifts and anyway the equity release/ mortgage has to be paid for. You either pay the Taxman or the mortgage provider. I don't think Insurance company would touch me: I'm nearly 80. I remember going to a lecture organised by the U3A when someone swaggered in saying ' Inheritance doesn't have to be paid' and then went on to explain how you can get around tiny sums. At the end I said what if it's in the region of millions at which point he faltered.

Reply to the comment left by Dennis Forrest at 16/12/2024 - 10:48
The taper only applies to gifts made in excess of the nil rate band, not to the whole amount, so is only of benefit if gifts of more than £325,000 have been made in the 7 years prior to death.

Reply to the comment left by Northernpleb at 16/12/2024 - 11:01
"With no resistance." Have you forgotten the (unsuccessful) application for judicial review of S24 and the endless campaigns since then?

"What is the point of the NLA ?" You probably mean the NRLA. Your frustration would be better directed at Government.

The NRLA, with membership of only 100,000 out of 2.5 million landlords is punching above its weight but recognises that politics is the art of the possible and in the end the elected Government will have its way.

Reply to the comment left by Yvonne Francis at 16/12/2024 - 11:52
If you look at the Life Expectancy Calculator on the Office for National Statistics website it give the life expectancy for a female life aged 80 as 10 years. I am already 80 myself and my life expectancy is 9 years. These are national average figures and will include people who are obese or overweight, smoke or drink too much, so if you are not one of these you have a fair chance of living longer. These policies are readily available for old people. Insurance companies will take these factors in to account and may require a medical. In the same way that they use to actuaries work out pension payouts, partially based on life expectancy, they will work out the life insurance premiums based on life expectancy and also on other things like the interest/return they can make on premiums before they have to pay out.
Bear in mind several things.
1.This biggest hit for the insurance company is if you die within the first 3 years but after that their liability falls as the IHT rate drops 8% every year.
2. I don't know, but you may get a substantial discount if you pay all the premiums up front as a lump sum. This could be paid out of capital so this would reduce your estate immediately.
3. When I last looked there was not a huge difference between interest rates on equity release and BTL mortgages but you will get 20% tax relief on BTL mortgage payments.
4. There is a fair chance that BTL mortgage rates may fall whereas equity release rates are usually fixed at the outset, and BTL mortgages will give you more flexibility.