On the 8th July 2015 George Osbourne, the chancellor of the Exchequer, announced the Government’s new budget for 2015 and within it brought about some interesting changes to the current inheritance tax rules.
Inheritance tax is what is paid when a person leaves their property and personal belongings to another when they die and their total “estate” is worth more £325,000. This is called the Inheritance Tax threshold.
The rate of tax paid is 40% on anything that is above the £325,000 threshold, however the rate could be reduced to 36% if 10% or more of the estate is left to charity. If you are married the threshold doubles as you can pass your inheritance tax allowance to your spouse. Therefore if a married couple have a joint estate of less than £650,000 there is no inheritance tax to be made payable on it.
The changes set out in the Budget are an introduction of a “family home allowance” worth £100,000 from 6th April 2017 increasing to £175,000 by 6th April 2020.
With the shared allowances of a married couple, this means that property up to £1million can be left free of Inheritance Tax if there are no other assets in the estate.
|Family home||Other Assets||Value of estate||Current IHT liability||IHT liability April 2017|
|Family Home||Other Assets||Value of estate||Current IHT liability||IHT liability April 2017|
This will only benefit estate with high value property which is the family home, it makes no difference if the larger assets are held in other investments. The allowance will remain at £325,000 until 2021.