Of great importance in the latest budget was the increase in the Inheritance Tax nil rate band which will extend to £500,000 per partner to the extent the liability relates to the family home. It is not a mere increase in the taxable threshold from £325,000 to £500,000; it is of relevance only where the estate includes the home and does not affect unmarried persons, those with no children or where the family home has been sold.
The “main residence nil rate band” as it will be known will affect those with direct descendants with an estate including their property with total assets above the existing threshold of £325,000 (this threshold is now frozen until the end of 2020/21). Direct descendants will be children (including step-children, adopted or fostered) of the deceased.
The new measure is being introduced gradually from 2017-18 with £100,000 to 6th April 2020 reaching the full increase of £175,000 and will rise in line with Consumer Prices Index from 2021/22 onwards. Any unused band can be transferred to a surviving partner.
It is the value of the estate which will affect the claim for the additional tax free threshold rather than just the value of the property.
Further rules apply to downsizing, if you own more than one property and properties worth more than £1 million, so the increase is not necessarily straightforward. It will not be a case of “no need to do anything”. As usual, seek our advice before taking any steps as there will still be further consultation on this matter.