From the 6th April 2017 there were changes to the amount a person can own on death before inheritance tax is payable.
Previously an individual could own up to £325,000 before inheritance tax was payable on their assets when they die. Where they gift everything to their spouse and have not made any gifts to others during their lifetime, then on the second spouse’s death their assets can be worth up to £650,000 before inheritance tax is payable. This is called the transferable nil rate band. Thereafter at present everything above this will be taxed at 40% (except assets that qualify for relief such as business or agricultural property).
From April this year a new residence nil rate band was added to benefit married couples, civil partners and families. In addition to the transferable nil rate band, a person can benefit for more relief from the value of a property that they lived in at some point and is gifted to one or more direct descendants on death. This can be children, step children, grandchildren and great-grandchildren for example.
The maximum amount allowable under this legislation will be phased in as follows:
- £100,000 for 2017 to 2018
- £125,000 for 2018 to 2019
- £150,000 for 2019 to 2020
- £175,000 for 2020 to 2021
So added to the current £650,000, a couple’s Estate could be worth up to £1 million in 2020 before inheritance tax is payable on their Estate.
For those with assets over £1 million, unmarried couples or people not leaving their estate to direct descendants, other tax planning options may be available to them.
To make sure that a family benefit from the greatest tax free advantage provided under the new laws, careful planning is required both in relation to their Wills and lifetime tax planning. We would therefore advise that you speak to Everys to make sure that your affairs are in order. After all, where we leave our Estate to our families, we want to make sure that they receive as much as possible to help their future.
Disclaimer: This article is not intended to constitute legal advice. For legal advice in connection with the above, please contact us directly.