The Finance Bill contains a new inheritance tax break, which will be a welcome relief to most (unless you are the deceased of course!). The Bill’s main intention is to introduce an additional £175,000 nil rate band which will apply to the value of your main residence and will be in addition to your £325,000 personal nil rate allowance, so potentially an individual could leave up to £500,000 before IHT becomes chargeable. However, the allowance isn’t available until April 2017 and will be introduced at a lower £100,000 level and then steadily increased by £25,000 per year. From 2021, it will then increase in line with the Consumer Price index.
This new allowance will only be available when the deceased has left their property to direct descendants i.e. children, grandchildren, and a spouse or civil partner.
The main residence nil rate band will also be reduced if your estate exceeds £2million. The allowance will reduce by £1 for every £2 that your estate exceeds £2million.
If you have any questions, please contact Michael Burgess on 01782 279615.