Homing in on Osborne’s Inheritance Tax giveaway

New details are still emerging regarding a significant change to Inheritance Tax announced in the Summer 2015 Budget.

The chancellor used the key political event to introduce the main residence nil-rate band, also known as the family home allowance.

For many married couples and civil partners, the change will increase the amount they can pass to their loved ones without paying Inheritance Tax (IHT) to £1m – a long-standing Tory aim.

The measure will be introduced gradually from April 2017 and will be fully in place from April 2020.

It will apply when the deceased’s interest in a residential property that has been his or her residence, and is included in the estate, is left to one or more ‘direct descendants’ on death. This definition includes a child, stepchild, adopted child or foster child of the deceased, as well as any lineal descendants – inheritance from grandparent to parent and parent to child.

As with all political announcements, the devil is in the detail. Buy-to-let properties and other non-residences will not qualify, and there are separate arrangements for properties valued over £2m and where individuals have sold their property to downsize.

HMRC has, however, confirmed that an estate would be eligible for the proportion of the allowance that is foregone as a result of downsizing or disposal.

While the family home allowance represents welcome news, not all taxpayers will benefit and additional planning will be required for some. Examples include:

  • Individuals who live in rented accommodation
  • Individuals who have no direct descendants
  • Individuals who have set up Discretionary Trusts via a will

For professional and impartial advice on IHT planning, call us today on 01244 347583. We would be delighted to help and are available at times to suit you.

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