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Chancellor George Osborne recently announced that the inheritance tax (IHT) threshold will be raised from £325,000 per person to £500,000.
This means that a married couple will be able to pass on assets worth up to £1m, including a family home, without paying any IHT at all.
Thousands of home owners have seen the value of their properties soar in recent years, particularly in London and the south east, thanks to a buoyant property market. This has raised concerns for many about the amount of tax their estate will incur after their death.
The Position before the Summer Budget 2015
IHT is currently charged at a rate of 40% on the value of an estate above the tax-free threshold, which has been frozen at £325,000 for each individual since 2009.
Married couples are currently entitled to apply to double this allowance on the second death, passing on assets to their children or other relations worth up to £650,000 before a tax charge is incurred.
What will happen now?
The Government will add a “family home allowance” worth £175,000 per person to the existing £325,000 tax free allowance, this will be gradually introduced from April 2017 to April 2020. This means that individuals can pass on assets worth up to £500,000, including a home, without paying any IHT at all. For married couples, the total is £1m.
What if I downsize my home?
Mr Osborne also announcedthat anyone who wants to downsize to a smaller property will be eligible for an “inheritance tax credit” so that even if they sell an expensive property they will still qualify for the new threshold.
If you would like to speak to one of the specialists in our Wills and Probate Department about Inheritance Tax and Wills then please contact firstname.lastname@example.org 01743 285888 and they will be happy to assist you.
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