Double Trouble – IHT for Siblings:

Inheritance Tax (IHT) Planning is a complicated area. Part of that is inevitably bound up in the constant state of flux of its guidelines. But don’t worry – this is actually a good thing! And as if to prove our point, there are now changes to IHT for siblings in the offing.

The ‘IHT for Siblings’ Problem

Currently, only married or registered civil partners are exempt from paying IHT on assets left to them by their spouse. Without detailing various exemptions etc, this means that cohabiting siblings are liable to pay the standard IHT of 40% on anything over the £325,000 threshold.

So, Lord Lexton has brought a new Bill to the House of Lords to level the playing field. Motivated by the case of the Utley sisters, the sad reality is that theirs is just one example of many. Having lived together for over 30 years in a house in Clapham they co-own, when one of them dies, the survivor will be forced to sell the property to be able to pay the IHT.

The ‘IHT for Siblings’ Resolution?

Lord Lexton’s proposals would see siblings exempt from paying IHT on property left to each other. The prerequisite being that they had cohabited for at least seven years and that the surviving sibling was over 30. The law, it is hoped, will be extended to apply to half brothers and sisters.

While the outlook looks good for cohabiting siblings, the questions surrounding adoptive siblings is symptomatic of a wider question. The new law still doesn’t extend to include cohabiting couples, though many do exactly that for often far longer periods of time than their married counterparts. Such couples still have no rights to their home on the death of their partner.

Our Thoughts

Any changes to the IHT legislation for cohabiting siblings will undoubtedly generate legal challenges around where the line is drawn. Other platonic couples, such as parents and children, or friends who own a house together, may also deem it equally unfair as to why they are not considered. So, when the time comes, whatever changes are implemented will have to be tightly drawn to ensure they’re not open to abuse.


If you would like to speak to an adviser about your IHT liability, please do call us on 01243 767 469. Alternatively, you can email us from our contact page, and an adviser will be in touch.

Written by Chris Page

Chris is an experienced financial service professional who joined the business in 2013, as a result of his hard work and dedication he was made a director of the firm late 2014.