The Government has finally honoured its promise to raise inheritance tax thresholds to £1m which will remove hundreds of estates from paying inheritance tax.
But they will not benefit everyone.
Breda Cashell, director in the private client team at Wake Smith looks at how these changes might affect you and your family.
“From 6 April 2017 the government are introducing an additional nil–rate band inheritance tax allowance.
“The additional nil rate band is claimable when a residence is passed on death to a direct descendant. For the purposes of this additional relief a direct descendant will be a child (including a step child, adopted child or fostered child) of the deceased and their lineal descendants.
“The government’s proposed figures to date for this allowance are as follows - £100,000 in 2017 to 2018; £125,000 in 2018 to 2019; £150,000 in 2019 to 2020 and £175,000 in 2020 to 2021.
“Any unused main residence nil rate band will be able to be transferred to a surviving spouse or civil partner as with the current transferrable nil rate bands.
“This applies where a surviving spouse or civil partner in a couple dies on or after 6 April 2017, irrespective of when the first of them died.
“This additional allowance will also be available when a person down sizes 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 in place at that time or passed on death to direct descendants.
“There will however be a tapered withdrawal of the additional main residence nil rate band for estates with a net value of more than £2m. This will be at a withdrawal rate of £1 for every £2 over this threshold.
“The allowance will be limited to one residential property, but the personal representatives of an estate i.e. the executors of the will or administrators of an intestacy (where someone dies without a will) will be able to nominate which residential property should qualify, if the deceased owned more than one property at the date of his or her death.
“A property which was never a residence of the deceased such as a buy to let property will not qualify.
“The implications of this additional residence nil rate relief are likely to be vast for most estates as it will see considerable savings in inheritance tax meaning families can ensure their assets are passed down to the next generation.
“The finer details of the act which governs this legislation are yet to be published but all clients should be aware that this additional relief will be coming into existence after 6 April 2017.
“Now may be a very prudent time to review your estate and tax planning.”
For further information contact Breda Cashell at Wake Smith on 0114 266 6660.
