One recent change that should be taken into consideration when drafting your Will is the additional Inheritance Tax (IHT) nil rate band for passing on the family home to ‘direct descendants’ on death.
Direct descendants refers to children (including adopted, foster and stepchildren) and grandchildren.
How much is my new IHT allowance?
Now that the additional relief is fully phased in it provides an extra £175,000 on top of to the normal £325,000 nil rate band. Where the allowance is unused on the death of the first spouse, the unused allowance is available on the death of the surviving spouse, potentially allowing a married couple (or civil partners) to potentially pass on assets of up to £1 million without paying IHT.
What are the restrictions on the new IHT relief?
This additional relief is, however, restricted if your assets exceed £2 million. The rules are fairly complicated but we can review your personal circumstances to ensure that you take advantage of all the relief that you are entitled to.
This IHT relief is even available when you downsize to a smaller property. For example, if a married couple currently live in a large house worth £500,000 and downsize to a property 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.
You could even sell up completely and move into a rental property or a care home and still get the inheritance tax relief!
We can work with your solicitor to make sure your Will is tax efficient. Get in touch to find out how our inheritance tax experts could help you by ensuring your loved ones don’t lose their inheritance to the taxman.