Previous speculation in the press that a new ‘death tax’ may be introduced proved unfounded in the Budget as the Chancellor decided not to tinker with the current IHT system.
The IHT nil-rate band, above which 40% IHT is due, continues to remain at £325,000 per person.
However, 6 April 2017 sees the introduction of the previously announced extra main residence allowance which is available to cover a person’s main residence if passed down to a direct descendent on death (i.e. a child or grandchild).
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.
Inheritance Tax can be a complex matter, however planning can be undertaken to ensure your exposure to any liabilities is minimised. If you would like to review your position please do not hesitate to contact one of our Tax Specialists on 01228 711888.