November Questions and Answers
Newsletter issue – November 2025
Q: I am widowed, and my £550,000 estate (includes my home) will be left to my children in a family trust deed. It was executed in 2017. Will they pay tax?
A: These types of trust were sold as a way to keep a home safe from inheritance tax or care costs, the idea being that your home wouldn't count towards your estate. However, this only works in specific circumstances.
If you have continued to live in the house without paying a market rent to the trustees, HMRC treats it as a gift with reservation, so the property remains part of your estate for inheritance tax purposes. If you are paying the market rate for rent, this could remove the reservation but will be creating taxable income for the trust.
With an estate of £550,000 you are covered by available allowances: the £325,000 nil-rate band plus a £175,000 residence nil-rate band, together shielding up to £500,000. This is doubled if you and your deceased partner were married (or in a civil partnership).
It should be noted that the residence nil-rate band applies only when the property passes directly to children or grandchildren. If the house is held in trust, HMRC may deny the relief unless the trust deed gives your children a clear entitlement; discretionary trusts risk losing the relief.
Q: I have a SIPP (self-invested personal pension) and will become a higher-rate taxpayer this tax year. How do I claim the additional tax relief?
A: As you are no doubt aware, whilst you are a basic-rate taxpayer, when you make a personal SIPP contribution, HMRC adds 20% basic-rate tax relief directly into your pension. For example: you pay £80; HMRC adds £20, so the gross contribution is £100 and the £20 is added automatically to the SIPP.
If you pay tax at more than 20%, you can claim additional tax relief (the extra 20% if you are a 40% taxpayer) via your self-assessment or by completing HMRC's online form / writing to HMRC after the end of the tax-year you wish to claim the relief for. Any extra relief is returned to you or used to reduce your tax bill; it is not paid into your pension.
Q: I'm selling my house to someone whose house I am buying. It is worth £50,000 more than mine, so can I gift my home and just pay stamp duty on the £50,000?
A:Whilst a property that is gifted in full does not incur stamp duty, this situation would likely be seen as linked transactions and fall under HMRC's anti-avoidance rules. These are in place to prevent the gifting of properties in both directions and one party paying the difference in their values.
Also, if there is an outstanding mortgage of £40,000 or more, stamp duty is payable on that rather than the property's value. The mortgage would have to be taken on by the new owner (subject to eligibility checks) or paid off in full.