Additional inheritance tax (IHT) relief when family home passed on.

For deaths on or after 6 April 2017 there is now an additional £100,000 inheritance tax (IHT) allowance where the family home is passed on to direct descendants.

This additional relief will be increased annually until it reaches a maximum of £175,000 by 2020. Furthermore, where the relief was not used on the death of the first spouse, it is available on the death of the surviving spouse.

This means that after 6 April 2020 a married couple can potentially pass on assets worth up to £1,000,000 without paying IHT as there would be £350,000 relief against the value of the family home in addition to the combined £650,000 nil rate bands (2 x £325,000).  However, the additional relief will be gradually withdrawn for estates in excess of £2million.

The new tax relief also applies in the situation when an individual downsizes, as long as this occurred after 8 July 2015.

Please note however, that the Labour Party have announced that if elected they will reverse this generous measure.

As mentioned in previous newsletters, it may be necessary to review your will and estate planning to ensure that you take full advantage of this new relief, so please do not hesitate to Contact Us to discuss this in more detail.