Inheritance Tax and Park Homes
There is often speculation following a recent budget about inheritance tax. If you want to protect your park home as an asset or a home to pass on to your loved ones, this quick guide to inheritance tax and park homes should help.
Receiving a Park Home in a Will
If you have been left a park home in a Will the rules on inheritance tax for park homes are the same as any other property which forms part of the estate of the deceased. While park homes should fall under the £325,000 threshold (frozen for five years in the March 2021 budget), it is the value of the entire estate, including the park home that is assessed for liability.
The first thing to remember is that inheritance tax is not levied on the beneficiaries of the Will, but on the estate of the deceased. The current rate of inheritance tax is 40%.
There is one exception to this, when some inheritance tax may need to be paid. If you have received a gift or gifts worth more than £325,000 in non-exempted gifts from the deceased in the seven years prior to their death, you will be liable to pay some inheritance tax on a sliding scale depending on how near to the death the gift was made.
Years between gift and death Tax due
0 – 3 40%
3 – 4 32%
4 – 5 24%
5 – 6 16%
6 – 7 8%
7 + 0%
If the value of the estate is below £325,000, there is no tax to be paid.
What you do with your inheritance is up to you, but if you’ve inherited a property and you now have two homes, you’ll need to nominate one of them as your main home within two years of inheriting it. If you choose to sell the property and it isn’t your main home, you may have to pay capital gains tax. If you choose to rent out your inherited property, you may have to pay tax on the rental income. Whatever you decide, you should tell HMRC which property is your main home.
Be aware too that if the park home is rented out, this counts as income on the estate and you will need to inform HMRC of this untaxed income as part of probate. After probate, you may be liable for income tax on any profit generated by your inherited park home.
If the deceased owns foreign rental property or rental property in the UK, you may also need to complete a tax return for their estate. You should inform HMRC of this income.
If the home was purchased on or before 26 May 2013, you will need to fill out a proposed gift form. If it is an agreement purchased after 26 May 2013 then the estate needs to simply assign the agreement to you. You can then inform the park owner and no commission is due to them as no money has been exchanged.
Do I need to inform the Land Registry?
Your ownership of the park home will not be registered with the Land Registry, and there is no legal obligation to instruct a solicitor on your part.
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