September 22nd, 2015
Inheritance tax allowance on homes to rise to £1m
During the most recent summer budget, it was announced that as from 2017 individuals with direct descendants, such as children or grandchildren, will be able to leave homes worth up to £850,000 to them without them paying inheritance tax (IHT) – rising to £1 million by 2020.
The current allowance, whereby no inheritance tax is charged on the first £325,000 of a person’s estate, remains unchanged. However, an additional nil-rate band of £175,000 on your main residence only will be introduced on a gradual basis, between 2017 and 2020, to add to the personal allowance of £325,000 making the nil rate band £500,000 per person. Above the threshold, inheritance tax is charged at 40%.
The Conservative Party announced this proposal as part of their pre-election manifesto, meaning that once in full force, the IHT nil-rate band allowance for property will come into effect increasing the allowance from £325,000 per person to £500,000 without having to pay inheritance tax.
This additional, or increased, band can only be used in regards to one residential property that has at some point been the main residence of the deceased.
Additionally any unused nil rate band can be transferred between a deceased civil partner or spouse to their surviving partner therefore giving the survivor a £1 million allowance.
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Written by: Kay Crooke – Practice Manager, Prosser Knowles Associates Limited
Prosser Knowles Associates Limited is Authorised & Regulated by the Financial Conduct Authority. The value of your investment can go down as well as up and you may not get back the full amount invested. The Financial Conduct Authority does not regulate Taxation and Trusts. The information in this document does not constitute advice or a recommendation for any product and you should not make any decisions on the basis of it. Your home may be repossessed if you do not keep up repayments on your mortgage.