Budget – Inheritance tax update
In his Summer Budget the Chancellor announced that the present tax-free allowance will remain frozen at £325,000 until April 2021.
However, for deaths after 5 April 2017, estates may qualify for an additional tax-free allowance starting at £100,000 where a residence is passed to descendants. Husbands and wives do not presently pay tax on anything they inherit from each other (provided the survivor is UK domiciled) and they will be able to pass their additional home allowance to each other, so that the survivor’s estate will benefit from a £200,000 additional allowance. This allowance will rise from £100,000 to £175,000 by 6 April 2020.
This additional allowance will be tapered for estates valued at £2m+. There will be provision to protect those who downsize or sell their home and do not buy another home.
It does not appear that the allowance will be available to those who leave their residence (or the sale proceeds) to non-descendants.
A consultation will be published in September with legislation introduced in the Finance Bill 2016. We will then learn the details of the new allowance.
In the meantime, we recommend that clients review their Wills and estate planning accordingly. If you are selling your home and downsizing or not buying a replacement property, we recommend you keep a copy of your completion statement with your Will.
Solicitors Ipswich Suffolk – for more information on our range of legal services, please contact us on 01473 611211.