It has been announced that an increase to the value of the family home which may be left free of inheritance tax is to be increased.
This will apply to individuals with direct descendants who have an estate (including a main residence) with total assets above the Inheritance Tax (IHT) threshold (or nil-rate band) of £325,000.
This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant (outlined below).
The additional allowances available (on top of the £325,000 allowances for any assets) will be:
The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
The measure will take effect for relevant transfers on death on or after 6 April 2017. It will apply to reduce the tax payable by an estate on death; it will not apply to reduce the tax payable on lifetime transfers that are chargeable as a result of death (e.g. on gifts typically made within 7 years of death).
The main residence nil-rate band will be transferable where the second spouse or civil partner of a couple dies on or after 6 April 2017 irrespective of when the first of the couple died.
If you would like any further information on how this new tax relief will affect you, please contact us and we would be happy to review your Will with you.Talk to our legal team
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