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Can I cut a property inheritance tax bill once probate has begun?

My family were forward thinking and took as many steps as we could to reduce the inheritance tax bill before my parents passed away. 

We are now faced with the confusing probate process and want to know if there is anything else we can do to limit our tax burden?

There are several ways to reduce your inheritance tax bill once the probate process has begun

There are several ways to reduce your inheritance tax bill once the probate process has begun

MailOnline Property expert Myra Butterworth replies: While measures may have been taken while your parents were still alive to minimise their inheritance tax bill, such as passing on wealth so that it eventually becomes exempt using the seven-year rule, there are still ways to potentially shave thousands off a tax bill during the probate process. 

These approaches use accepted discounts offered by HMRC. We spoke to an expert, who highlighted seven ways to reduce you tax bill once the probate process has begun.

We take a look at how it is possible to lower the declared value on the assets, especially on property

We take a look at how it is possible to lower the declared value on the assets, especially on property

Nick Green, of The CoreProp Group, replies: It is well documented how to reduce or even avoid inheritance tax before a loved one passes, and people should be doing as much as possible to prepare for this.

However, sadly, there is not as much advice once your loved one has passed. During the confusing and often distressing probate process, there are huge savings to be made.

The amount of inheritance tax paid depends on the value of the deceased’s estate, which is worked out based on their assets (i.e sum of property, cash, shares, contents etc) minus any debts. The figure is then taxed at 40 per cent after any allowances.

You can, however, lower the declared value on the assets, especially on the property, which is typically the most valuable part of any estate.

At such an emotive time it is easy to overlook HMRC’s small print when assessing an estate’s value.

HMRC strongly advise executors or administrators to instruct a qualified independent valuer to assess the value of the property for probate.

The professional valuation report – known as an ‘RICS Red Book’ report – should incorporate answers to all the following critical questions, which could help lower the tax bill:

1) What date are you valuing the property at?

The valuation of the property for probate is fixed as at the date of passing, this is important to remember. Market fluctuations (such as the rising energy costs, Covid 19 lockdowns etc) severely affect the property market and often lead to dramatic movement and loss of confidence. For example, the property market was estimated to drop around 20 per cent in April 2020 during the most uncertain Covid periods. The value of the property at the date of death may be much lower than the current market value or any estate agent’s appraisal.

2) Is the property tenanted?

If the property is occupied by typical Assured Shorthold Tenants, typically on a term of one year or less, HMRC usually accepts a discount of 5 per cent on the full value of the property.

If the tenant is under a commercial lease or has a longer fixed term tenancy, the deductions can be greater than 5 per cent. Many estates miss out on this easy concession.

3) Any major defects or missing safety certificates?

If at the date of death, the property was suffering from defects such as subsidence or severe damp, even if these faults have now been fixed, these matters should be considered when assessing the value.

And properties in blocks of flats may not have their EWS1 (External Wall Safety) forms, which declares their cladding fire safe.

All these major issues can mean it is not possible to get a mortgage on the property and so the value to be declared should be much lower.

Inheritance tax: The basics 

Inheritance tax is charged at 40 per cent above the tax-free allowances everyone has on their estate, known as nil rate bands.

This is made up of the standard nil rate band of £325,000 per individual – of which any unused element can be passed on to a spouse or civil partner, effectively doubling their allowance to £650,000. 

Under current rules, if you give away a main family home to direct descendants, a total of £500,000 each, or £1million combined, is the maximum value that a married couple or civil partners’ estate can reach before it starts being liable for the 40 per cent inheritance tax rate.

In total, this means property-owning spouses can benefit from a £1million buffer before their estate incurs inheritance tax.

But if the total value of an estate is worth £2million or more, the additional main residence nil rate band will be tapered at £1 for every £2 over the £2million threshold, meaning some higher value estates eventually lose the own home benefit altogether.

The other key inheritance tax basic to remember is the seven-year rule. 

This applies to gifts that are above set limits – for example, making more than £3,000 in gifts per year – and are known as potentially exempt transfers. 

Such a gift will only be free of inheritance tax if you survive more than seven years after making it.

If someone dies between years three and seven of making a gift, inheritance tax on it tapers down on a sliding scale. 

 

4) Was the property co-owned at the date of passing?

Section 18 of the IHT Manual permits a further 15 per cent deduction of the deceased’s share of the property, if at the valuation date, any co-owner remained in occupation of the property as their main residence.

If the co-owner(s) did not occupy the property as their main residence, the discount can still be up to 10 per cent.

5) Is the property owned by a company?

Again, a discount on the deceased’s share should be applied, up to a level of 20 per cent depending on whether the deceased owned minority shares or majority shares.

6) Are there any neighbourly issues?

For example, a neighbour’s planning application can have an adverse effect on the value of a property.

In addition, there may be some macro changes in the location, such as schools closing down, or high streets changing. All these factors could detract from the desirability of the property.

7) Is the property in a block of flats?

Often the Freeholder or managing agent will be in the process of preparing to do major works to the common areas of the block including the exterior fabric, and an additional large invoice will be sent to the leaseholders.

Often if such works are underway or about to be instructed, these potential added expenses should be considered when valuing the property for probate.

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Would YOU live here? Seaside cottage with stunning coastal views is branded ‘uninhabitable’ and ‘unsafe’ in listing – but is on the market for just £75,000

  • Woodbine Cottage in Ardersier, near Inverness has been put on the market 
  • The four-bedroom home has remarkable views of the Moray Firth 

A seaside cottage with stunning coastal views has been branded ‘uninhabitable’ and ‘unsafe’ in its listing – but has still gone on the market for just £75,000.

Potential buyers of Woodbine Cottage in Ardersier, near Inverness, may get some remarkable views of the Moray Firth, but also face a massive renovation job to make the building fit to live in.

Photos show the interior of the four-bedroom home, which has been vandalised and left littered with old clothes and belongings.

The property will require extensive works throughout, but Auction House Scotland believes it ‘offers a fantastic opportunity to create a stunning family home’.

The house, which includes a garage, has been ‘extensively extended’ to create a total floor area of over 350 sqm – which could be converted into a family home or a rental opportunity.

Woodbine Cottage in Ardersier, near Inverness, comes with a remarkable view of the Moray Firth - but potential buyers face a massive renovation job

Woodbine Cottage in Ardersier, near Inverness, comes with a remarkable view of the Moray Firth – but potential buyers face a massive renovation job

Photos show the interior of the home, which has been vandalised and left littered with old clothes and belongings

Photos show the interior of the home, which has been vandalised and left littered with old clothes and belongings

The seaside cottage has been branded 'uninhabitable' and 'unsafe' in its listing

The seaside cottage has been branded ‘uninhabitable’ and ‘unsafe’ in its listing

The property will require extensive works throughout, but Auction House Scotland believe the house 'offers a fantastic opportunity to create a stunning family home'

The property will require extensive works throughout, but Auction House Scotland believe the house ‘offers a fantastic opportunity to create a stunning family home’

‘The property further offers garden areas to front and rear, with the upper floor balconies enjoying great views over the Moray Firth,’ reads the listing.

‘The property is currently unhabitable, hence no Home Report is available, but a full programme of works would add massive value and offers the opportunity to adapt the current accommodation format subject, of course, to any required permissions/warrants.

‘The potential and value on offer is sure to attract strong levels of demand and, as such, early viewing is essential to avoid missing out.’ 

The original stone built dwelling has been extensively extended with the addition of north and south wings to create a total floor are in excess of 350 sq.

Auction House Scotland believe the property offers a fantastic opportunity to create a ‘stunning family home’ or to be rented out to holidaymakers. 

They also claim that a full programme of works would add ‘massive value’ to the building. 

The stunning view of the Moray Firth seen from the property

The stunning view of the Moray Firth seen from the property 

Auction House Scotland believe the property offers a fantastic opportunity to create a 'stunning family home' or to be rented out to holidaymakers

Auction House Scotland believe the property offers a fantastic opportunity to create a ‘stunning family home’ or to be rented out to holidaymakers

They also claim that a full programme of works would add 'massive value' to the building

They also claim that a full programme of works would add ‘massive value’ to the building

Once renovations are completed, the property will have a council tax band of C.

Mandi Cooper, Managing Director of Auction House Scotland, said: ‘Woodbine Cottage is certainly a project suited to a keen developer or investor, and it deserves to be lovingly renovated back to its former glory.

‘With huge opportunity to add value, and holiday lets in the Highlands being an ever-popular way to generate income, this would also be ideal for serviced accommodation providers.’

Woodbine Cottage will go to auction on May 30 with Auction House Scotland, with a viewing date of May 22

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Top 10 Florida Cities Dominate The Business Startup Landscape In The U.S.

Top 10 Florida Cities And Business Startup Landscape In The U.S.

The Voice Of EU | Florida emerges as a hub for entrepreneurial endeavors, with its vibrant business landscape and conducive environment for startups. Renowned for its low corporate tax rates and a high concentration of investors, the Sunshine State beckons aspiring entrepreneurs seeking fertile grounds to launch and grow their businesses.

In a recent report by WalletHub, Florida cities dominate the list of the top 10 best destinations for business startups, showcasing their resilience and economic vitality amidst challenging times.

From Orlando’s thriving market to Miami’s dynamic ecosystem, each city offers unique advantages and opportunities for entrepreneurial success. Let’s delve into the chronologically listed cities that exemplify Florida’s prominence in the business startup arena.

1. Orlando Leads the Way: Orlando emerges as the most attractive market in the U.S. for business startups, with a remarkable surge in small business establishments. WalletHub’s latest report highlights Orlando’s robust ecosystem, fostering the survival and growth of startups, buoyed by a high concentration of investors per capita.

2. Tampa Takes Second Place: Securing the second spot among large cities for business startups, Tampa boasts a favorable business environment attributed to its low corporate tax rates. The city’s ample investor presence further fortifies startups, providing essential resources for navigating the initial years of business operations.

3. Charlotte’s Diverse Industries: Claiming the third position, Charlotte stands out for its diverse industrial landscape and exceptionally low corporate taxes, enticing companies to reinvest capital. This conducive environment propels entrepreneurial endeavors, contributing to sustained economic growth.

4. Jacksonville’s Rising Profile: Jacksonville emerges as a promising destination for startups, bolstered by its favorable business climate. The city’s strategic positioning fosters entrepreneurial ventures, attracting aspiring business owners seeking growth opportunities.

5. Miami’s Entrepreneurial Hub: Miami solidifies its position as a thriving entrepreneurial hub, attracting businesses with its dynamic ecosystem and strategic location. The city’s vibrant startup culture and supportive infrastructure make it an appealing destination for ventures of all sizes.

6. Atlanta’s Economic Momentum: Atlanta’s ascent in the business startup landscape underscores its economic momentum and favorable business conditions. The city’s strategic advantages and conducive policies provide a fertile ground for entrepreneurial ventures to flourish.

7. Fort Worth’s Business-Friendly Environment: Fort Worth emerges as a prime destination for startups, offering a business-friendly environment characterized by low corporate taxes. The city’s supportive ecosystem and strategic initiatives facilitate the growth and success of new ventures.

8. Austin’s Innovation Hub: Austin cements its status as an innovation hub, attracting startups with its vibrant entrepreneurial community and progressive policies. The city’s robust infrastructure and access to capital foster a conducive environment for business growth and innovation.

9. Durham’s Emerging Entrepreneurship Scene: Durham’s burgeoning entrepreneurship scene positions it as a promising destination for startups, fueled by its supportive ecosystem and strategic initiatives. The city’s collaborative culture and access to resources contribute to the success of new ventures.

10. St. Petersburg’s Thriving Business Community: St. Petersburg rounds off the top 10 with its thriving business community and supportive ecosystem for startups. The city’s strategic advantages and favorable business climate make it an attractive destination for entrepreneurial endeavors.

Despite unprecedented challenges posed by the COVID-19 pandemic, the Great Resignation, and high inflation, these top Florida cities remain resilient and well-equipped to overcome obstacles, offering promising opportunities for business owners and entrepreneurs alike.


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European Startup Ecosystems Awash With Gulf Investment – Here Are Some Of The Top Investors

European Startup Ecosystem Getting Flooded With Gulf Investments

The Voice Of EU | In recent years, European entrepreneurs seeking capital infusion have widened their horizons beyond the traditional American investors, increasingly turning their gaze towards the lucrative investment landscape of the Gulf region. With substantial capital reservoirs nestled within sovereign wealth funds and corporate venture capital entities, Gulf nations have emerged as compelling investors for European startups and scaleups.

According to comprehensive data from Dealroom, the influx of investment from Gulf countries into European startups soared to a staggering $3 billion in 2023, marking a remarkable 5x surge from the $627 million recorded in 2018.

This substantial injection of capital, accounting for approximately 5% of the total funding raised in the region, underscores the growing prominence of Gulf investors in European markets.

Particularly noteworthy is the significant support extended to growth-stage companies, with over two-thirds of Gulf investments in 2023 being directed towards funding rounds exceeding $100 million. This influx of capital provides a welcome boost to European companies grappling with the challenge of securing well-capitalized investors locally.

Delving deeper into the landscape, Sifted has identified the most active Gulf investors in European startups over the past two years.

Leading the pack is Aramco Ventures, headquartered in Dhahran, Saudi Arabia. Bolstered by a substantial commitment, Aramco Ventures boasts a $1.5 billion sustainability fund, alongside an additional $4 billion allocated to its venture capital arm, positioning it as a formidable player with a total investment capacity of $7 billion by 2027. With a notable presence in 17 funding rounds, Aramco Ventures has strategically invested in ventures such as Carbon Clean Solutions and ANYbotics, aligning with its focus on businesses that offer strategic value.

Following closely is Mubadala Capital, headquartered in Abu Dhabi, UAE, with an impressive tally of 13 investments in European startups over the past two years. Backed by the sovereign wealth fund Mubadala Investment Company, Mubadala Capital’s diverse investment portfolio spans private equity, venture capital, and alternative solutions. Notable investments include Klarna, TIER, and Juni, reflecting its global investment strategy across various sectors.

Ventura Capital, based in Dubai, UAE, secured its position as a key player with nine investments in European startups. With a presence in Dubai, London, and Tokyo, Ventura Capital boasts an international network of limited partners and a sector-agnostic investment approach, contributing to its noteworthy investments in companies such as Coursera and Spotify.

Qatar Investment Authority, headquartered in Doha, Qatar, has made significant inroads into the European startup ecosystem with six notable investments. As the sovereign wealth fund of Qatar, QIA’s diversified portfolio spans private and public equity, infrastructure, and real estate, with strategic investments in tech startups across healthcare, consumer, and industrial sectors.

MetaVision Dubai, a newcomer to the scene, has swiftly garnered attention with six investments in European startups. Focusing on seed to Series A startups in the metaverse and Web3 space, MetaVision raised an undisclosed fund in 2022, affirming its commitment to emerging technologies and innovative ventures.

Investcorp, headquartered in Manama, Bahrain, has solidified its presence with six investments in European startups. With a focus on mid-sized B2B businesses, Investcorp’s diverse investment strategies encompass private equity, real estate, infrastructure, and credit management, contributing to its notable investments in companies such as Terra Quantum and TruKKer.

Chimera Capital, based in Abu Dhabi, UAE, rounds off the list with four strategic investments in European startups. As part of a prominent business conglomerate, Chimera Capital leverages its global reach and sector-agnostic approach to drive investments in ventures such as CMR Surgical and Neat Burger.

In conclusion, the burgeoning influx of capital from Gulf investors into European startups underscores the region’s growing appeal as a vibrant hub for innovation and entrepreneurship. With key players such as Aramco Ventures, Mubadala Capital, and Ventura Capital leading the charge, European startups are poised to benefit from the strategic investments and partnerships forged with Gulf investors, propelling them towards sustained growth and success in the global market landscape.


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