New inheritance tax rules for passing on the family home start on 6 April 2017 and many people have a New Year’s Resolution to either make a Will or update their Wills.
This new relief should be taken into consideration when drafting your Will and we can work with your solicitor to make sure it is tax efficient.
From 6 April 2017 a new nil rate band of £100,000 will be available on death where your residence is left to direct descendants. This is in addition to the normal £325,000 nil rate band and will increase over the next 4 years to £175,000 in 2020.
You may recall that when this was originally announced in summer 2015 the chancellor said that a married couple should be able to pass on their family home worth up to £1 million free of Inheritance tax.
The rules are fairly complicated and HMRC have recently issued guidance on how the new relief will operate.
We can review your personal circumstances to ensure that you take advantage of all relief that you are entitled to.
Downsizing to a smaller property
One of the features of the new inheritance tax rules for passing on the family home is that the relief is protected even when you downsize to a smaller property.
For example if a married couple currently live In a large house worth £800,000 and downsize to a flat worth £300,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property. They could even sell up completely and move into a rental property and get the inheritance tax relief!
This would very much depend on the timing of such planning and, as mentioned above, the rules are very complicated so contact us to discuss how this can apply in your family circumstances.