The 2016 Budget brought no significant changes to IHT however the announcements made in previous Budgets remain topical.
As previously announced, the nil-rate band for IHT, which is the amount of a person’s estate that is not taxable on death, has been frozen at £325,000 until 2020/2021.
However, there is to be a further tax-free amount to cover a person’s main residence if passed down to a direct descendant (i.e. children or grandchildren).
This main residence nil-rate band will be introduced at £100,000 in 2017/2018 and will gradually increase up to £175,000 by 2020/2021. This amount is transferable to a surviving spouse or civil partner, like the existing nil-rate band, but will be reduced for net estates of over £2,000,000 at a rate of £1 for every £2 over the threshold.
IHT and domicile
For non-domiciled individuals, IHT will be payable on all UK residential property from April 2017, regardless of their residence status for tax purposes.
As announced in the Summer 2015 Budget, from April 2017, the period in which an individual needs to be resident in the UK to be deemed as domiciled has been changed from 17 out of 20 years to 15 out of 20 years. It will also treat individuals who were born in the UK to parents who are domiciled here as UK domiciled whilst they are in the UK.
Inheritance Tax can be a complex matter however planning can be undertaken to ensure your exposure to any liabilities can be minimalised. If you would like to review your position, please do not hesitate to contact one of our Tax specialists on 01228 711888.