Inheritance Tax discounts for jointly-owned property

If you own property with someone else (for example your spouse) when you die, you can claim a reduction in the value of your share for Inheritance Tax purposes.

This is known as a "Co-Owner Discount". It does not matter if you own the property as joint tenants or tenants-in-common, the discount is the same.

Jack and Jill own a house worth £800,000. Jack dies and leaves his half share of £400,000 to Jill. For inheritance tax purposes, his £400,000 share is reduced by 15% for IHT purposes, in other words to £340,000.

If Jill was not actually living at the property, the discount would be 10%, so the reduced value would be £360,000.

HOWEVER, on Jill's death, she would own the whole house, so no Co-owner discount would apply and the full £800,000 valuation would be in her estate for IHT purposes.

Had Jack left his half-share of the property into trust (for Jill or the family's benefit) on his death, then on Jill's death, the property would still be co-owned so the Co-owner discount would still apply.

IF YOU WANT TO INCLUDE A DISCRETIONARY TRUST IN YOUR WILL TO BENEFIT TWICE FROM THE CO-OWNER DISCOUNT, GIVE US A CALL.

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