From April 2020, married couples and civil partners will be able to leave property worth up to £1m to their children and grandchildren tax free.
The changes were announced in Budget 2015 and exempt estates from Inheritance Tax when passed onto direct descendants. For example, leaving property to a niece would not qualify for this additional allowance.
The IHT threshold is currently £325,000 per person with the additional ‘family home allowance’ of £175,000 available for most estates. This additional allowance will not apply to estates worth in excess of £2m.
There will be a staged introduction of the family home allowance, initially worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20 then the £175,000 in 2020-21.
Says tax partner Julia Whelan, “Individuals should consider their inheritance tax position to ensure they’re using all reliefs available to them. Even if the family home allowance isn’t available, there are still other options to consider when optimising the tax position”.
Continues Julia “There are other IHT-saving tools available, such as making gifts out of income, use of Potentially Exempt Transfers and gifting to charity in order to reduce exposure the IHT”.
If you would like to find out how to reduce your exposure to Inheritance Tax or to find out more about estate planning, please contact Julia Whelan on 01527 558539 or [email protected].