Tags: Private Client, Wills And Probate, Wills
The Chancellor, George Osborne announced in his budget on Wednesday that he will effectively raise the individual inheritance tax threshold from £325,000 to £500,000 for those with a family home.
Married couples and civil partners may therefore be able to pass on estates to their children or grandchildren worth up to £1million without paying inheritance tax.
As house prices increase, more people find that their estates may attract inheritance tax – did you know that that average price of a house in the South West is now over £200,000?
However, the changes won’t take effect straight away, and there are some technical rules, so it is important to get appropriate expert advice to ensure that you are using your allowances effectively.
The existing allowance of £325,000 will remain. For married couples, and those in Civil partnerships, the allowance can be carried forward when the first spouse dies (if they leave their assets to their spouse), so that a couple can leave up to £650,000 on the death of the second spouse before any inheritance tax is payable.
From 6th April 2017, the new allowance will be available, initially allowing an additional £100,000 ‘family home’ allowance . This will increase in stages until 2020 when the family home allowance will be £175,000 per person, meaning that if you were to die in 2020, leaving an estate of £500,000, including your family home, your estate would pay no inheritance tax. For a married couple, the amount which could be left would be £1M.
The additional allowance applies only to the value of your home, and only where the house is left to your children or grandchildren.
If you have sold your home to move to supported accommodation or to a care home, you may still be eligible for an ‘inheritance tax credit’ up to the amount of the family home allowance, although the government has not yet provided details of how this will work, and who will qualify.
“The new rules mean that people will need to think carefully about how they want to deal with their property, particularly as they get older” says Private Client Partner and Inheritance Tax expert Darrell Collins. “It’s important to plan ahead, and to get expert advice, to ensure that you maximise any tax savings you are entitled to. You may need to update your will to take into account the new rules.”
For more information on minimising your inheritance tax liability and related issues contact our Private Client team. Appointments are available at all of our offices, and home visits can be made, if appropriate.