Inheritance Tax (IHT) is a thorny issue, and combines our only certainties in life; death and taxes.
At present, a single estate will pay 40% tax on everything above the Nil-Rate Band of £325,000. For married couples and civil partners this can be doubled, as gifts between spouses pass free of IHT, and any unused allowance can be claimed by the survivor.
The new change is to the Residence Nil-Rate Band (RNRB). From the 6 April 2017, a main residence can be covered by an £100,000 tax free allowance per person, provided it is left to “lineal descendants”. This amount will then increase by £25,000 per year until 2020.
Lineal descendants includes a spouse and children, also step children, foster children and the widows/widowers of any deceased children
In total, couples with lineal descendants can leave an estate of up to £1 million free of IHT. For couples without children, up to £650,000 can pass free of tax. For single estates only £325,000 will be tax exempt.
However, the new rules are very complicated. The RNRB can apply to persons that have sold or downsized property. The amount of the exemption is reduced for those with estates worth more than £2 million. Also care must be taken when a property is left in trust under a Will.
In light of this change there is a need to obtain professional advice.
At QualitySolicitors Parkinson Wright we are equipped with the experience and knowledge required to advise you on this increasingly complex area of law, tailoring your Will to your circumstances and requirements.
For additional information, please contact a member of our Private Client Team on 01905 721600