New Inheritance Tax Rules for Residential Property
For many of our clients seeking to secure their family’s future, much consideration is given to what they would wish to happen when they pass away. In a previous issue of The Exchange we discussed the importance of making a Will in order that your assets pass to who you wish. At Arnold Greenwood, we find that a major concern amongst our clients is the amount of inheritance tax that their estate may have to pay in the future. Many families are keen to ensure that their estate falls within the current inheritance tax nil rate band, which has been frozen by the government until 2020 at £325,000. To do this, clients can decide to transfer assets during their lifetime.
However, this year, the Government has introduced a new inheritance tax residence nil rate band which is designed to assist individuals whose main residence will pass to their surviving children or other direct lineal family such as grandchildren, upon their death. In addition to the current nil rate band of £325,000, if a person dies on or after 6 April 2017, a further yearly £100,000 residence nil rate band allowance is applied to the value of the property. The residence nil rate band increases by £25,000 each tax year up to 2021, following which it will increase in line with CPI. If a property is owned by a couple, a residence nil rate band is taken into account for each person and will pass to a surviving spouse to be used when they too pass away.
The new residence nil rate band applies to property inherited by a will, under the Intestacy Rules or otherwise, for example, by survivorship to a joint owner of a property.
This new legislation will clearly play a key part in clients’ planning for the future of their families. Complications may arise in respect of property left in trust under a will. Also, where an estate exceeds a value of £2 million, the amount of residence nil rate band is tapered.
If you would like advice as to how the nil rate band is applied in more specific circumstances, please contact our experienced solicitors in our Wills, Trust and Probate department who will be able to assist you with your future plans.
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01539 720049, or complete your details in the form below.