As mentioned in the manifesto Mr Osborne has confirmed the introduction of an additional inheritance allowance that will be available in addition to the current £325,000 nil rate band. When the relief is fully implemented it allows a couple to pass on the family home tax free up to a value of £1,000,000.
The additional allowance, which will also be transferable to the surviving spouse, will start at £100,000 for 2017/18.
The allowance will then increase as follows:
- £125,000 in 2018/19
- £150,000 in 2019/20
- £175,000 in 2020/21
Unfortunately the Chancellor also announced that the inheritance tax nil rate band will be frozen at £325,000 until 6 April 2021.
The main residence nil band is subject to a taper where the amount being left is more than £2,000,000 with £1 of the family home allowance being lost for every £2 of estate value over £2,000,000.
This adjustment is based on the value of the estate before reliefs such as business property relief and agricultural property relief and may result in some additional complications and the need to redraft your will.
Please contact us if you would like us to review your inheritance tax position.