Extra Inheritance Tax free allowances to cover the value of the family home
The Finance Bill 2015 proposes extra Inheritance Tax allowances for those who have a family home which they wish to leave to their descendants.
The present ‘nil rate band’ for Inheritance Tax is £325,000 for each individual. The proposal is that up to an extra £175,000 per person could be left without paying Inheritance Tax, if the person’s assets include a family home.
However, the extra allowances only apply if you have direct descendants, which are to be defined as your children, step-children, grandchildren, and foster children. Those who do not have direct descendants will not qualify for the relief. Those who do not own a family home will not qualify (except in limited circumstances, such as where the house has been sold to meet nursing home fees). Gifts of property to some types of Will trusts will not qualify for the relief.
The proposals are for the relief to start to come into effect for those who die on or after the 6th April 2017, at which point the extra relief will only be £100,000. The relief will increase by a further £25,000 per year until it reaches the full amount of £175,000 for those who die on or after the 6th April 2020. For spouses and civil partners, any unused allowances from the estate of the first to die can be transferred to the survivor. For those with larger estates, which may exceed £2 million, the relief is withdrawn on a tapered basis, being completely lost for those whose estate exceeds £2.2 million.
These proposals are in draft form only at the moment, and may be amended further before the Finance Act is passed this autumn.
