IHT Home Gardens limits Date: 2024-04-18
IHT Home Gardens limits
“I seem to recall there is an area of garden attached to a home that goes over some inheritance tax threshold, is that right?”
Yes, you’re quite right — inheritance tax (IHT) in the UK does have a nuanced treatment of land and gardens attached to a home, particularly in relation to what’s considered part of the “dwelling house” eligible for tax reliefs like the Residence Nil Rate Band (RNRB).
Here’s how it works in detail:
⸻
🏡 The “Dwelling House” and Garden Area
For Inheritance Tax, the value of an estate can potentially benefit from the Residence Nil Rate Band (RNRB), which adds an additional tax-free threshold when a home is passed to direct descendants (children, grandchildren, etc.).
However, not all land associated with a home automatically qualifies for this relief.
🔹 The General Rule
Only the part of the land that is “reasonably required for the enjoyment of the property” as a home will be included. This typically includes: • Gardens • Grounds • Driveways • Outbuildings (e.g., garages or sheds)
But only up to 0.5 hectares (1.24 acres) is presumed to be allowable without question.
🔹 Larger Gardens or Grounds
If the property includes more than 0.5 hectares, HMRC may challenge whether the extra land is necessary for the reasonable enjoyment of the home. If not, the excess could be excluded from the RNRB, meaning it may be taxed.
⸻
🧾 Relevant HMRC Guidance
HMRC refers to this in the Inheritance Tax Manual (IHTM), particularly: • IHTM44003: Discusses gardens and grounds • IHTM46030: Covers RNRB and the definition of a dwelling
⸻
📌 Key Points to Remember • 0.5 hectares is generally accepted without needing justification. • Anything larger must be demonstrably required for the property’s enjoyment as a home. • If the property is rural or stately, larger grounds may be acceptable, but that would depend on context and precedent. • If the excess land has been split, sold, or used commercially, it may be excluded entirely from relief.
⸻
When dealing with an estate or property and assessing how much of the garden is considered part of the main residence for IHT purposes, HMRC’s District Valuer may be involved to determine what’s “reasonable.”