Who wants to be a millionaire? You may have heard talk for some years of the inheritance tax limit being increased to £1 million. This is being introduced by the government but not everyone will qualify.
Every person has an inheritance tax-free allowance, known as the nil-rate band, which is, at present £325,000. In the case of married or civil partners, any unused nil-rate band for the first to die can be transferred to the surviror. Therefore, at present, on the death of the second, the potential available nil-rate band available is £650,000.
The government has introduced an additional inheritance tax allowance, which gives a further £175,000 per person (totalling £500,000), which is also transferable to the surviror. This makes the advertisised total of £1 million. The new nil-rate band applies to anyone dying after April 6, 2017 and will be introduced over a period, so, in the tax year 2017/18, the additional allowance is £100,000 and increases by £25,000 per year, until it totals £175,000 in 2020/2021.
It is only available in respect of a person's main residence. The full details have not yet been published but it appears it still may be claimed when a person no longer owns a home or has downsized. The additional allowance only applies to a residence already giften within the last seven years would not qualify for the allowance against the inheritance taz, which would still be payable.
The residence must be gifted to direct descendants, that is, children or grandchildren, but would not apply to gifts to other relatives, such as sisters or brothers, nieces or nephews or indeed people with whom the deceased was in a relationship (unless they were marries or in a civil partnership).
As is almost always the case, the headline does not show the full story. The new rules are complicated. The detail has not yet been issued in full and caution should be taken before seeking to rely on the new riles. You should seek specialist advice from your solicitor.
Who wants to be a millionaire? You may have heard talk for some years of the inheritance tax limit being increades to £1 million. This is being introduced by the government but not everyone will qualify.