Many people have been concerned about the impact that passing on their home could have on their families’ inheritance tax (IHT) bill, since many homes would push the size of estates over the £325,000 IHT threshold. Another of the Summer Budget announcements was designed to ease these worries by giving each individual an additional IHT ‘residence nil rate band’ of £100,000, which will increase by £25,000 a year from April 2017 and each year to reach £175,000 in 2020. This applies where the main home goes to a direct descendant only, so will not benefit those without children as the standard nil rate band is frozen until 2020/21.
Because any unused IHT Allowance can be passed from one spouse/civil partner to another, inheritance tax exemptions for a married couple or registered civil partnership could total £650,000. With the family home allowance also being transferable, the addition of £175,000 per person by 2020/21 could result in total combined exemptions for each couple of up to £1 million. However, the additional allowance cannot be used against other assets if the value of the home is below that amount and the new allowance is tapered down for estates worth above £2 million. So whilst the announcements could benefit some families there is more complexity to this tax than ever before and it is important to understand how this affects you.
To find out more information on how IHT could impact your family and how Nationwide can help, contact our Financial Planning Service on 0800 328 7812.