Homeowners advised to avoid inheritance tax by passing second home on now

Elderly owners of second homes are being advised to pass their property on now in order to avoid inheritance tax. Rent could then be paid to their beneficiaries for the time the property is occupied.

In order to avoid a 40 per cent inheritance tax bill on their holiday home , homeowners should consider passing on their second home to their beneficiaries now, advises wealth management lawyers Moore Blatch.

More mature second home owners may have their inheritance tax limit - £624,000 for a married couple - wiped out by their primary UK residence, leaving their second property open to the 40 per cent inheritance tax . However, they could get rid of this liability in seven years by giving their second home to their heir now and then paying rent to use it. The only tax that would need to be paid would be income tax by the beneficiaries on the rent paid.

"Property is notoriously hard to give away for the purposes of inheritance tax planning as it is a single asset that is difficult to give away piecemeal. However, by setting up a suitable trust all the inheritance tax can be saved 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," said Andy Kirby of Moore Blatch.

According to the firm's figures, there are an estimated 350,000 holiday homes in England and an estimated 260,000 people own second homes abroad.

This story was brought to you by holiday lettings .co.uk, the UK's No.1 holiday home website.

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