George Osborne has recently delivered his seventh Budget as chancellor, the first for a majority Conservative government since November 1996. One of the headlines in the news read ‘End of Inheritance tax on family homes worth up to £1m’
At present, inheritance tax is payable at 40% on the value of an estate in excess of the tax-free allowance of £325,000 per person. Married couples and registered civil partners can pass any unused allowance on to the estate of the other on death.
From April 2017 there will be a further £175,000 "family home allowance" to enable a property to be passed on to children on death, free of tax.
This allowance will be added to the existing £325,000 inheritance tax threshold, bringing the total transferable tax-free allowance from both parents in a married couple or civil partnership to £1m.
Children or grandchildren where a single parent owns the property won't receive the full inheritance tax benefits as those who are married or in a registered civil partnership as only one allowance will be available.
The full £175,000 additional threshold will come into effect in 2020, but it will be introduced gradually, starting in 2017. At that point, this new tax-free 'main residence' band will be set at £100,000, rising by £25,000 each year till it reaches £175,000 in 2020.
PM David Cameron and Mr Osborne have said that those who worked for their homes should be able to pass them on to family members and I am sure that most of us would agree with that.
If you need advice on your Will or an Estate of someone who has recently died, please contact me.