Smith Partnership Solicitors, celebrating its 30th anniversary this year, is offering advice to the general public as the new tax year in April 2017 brings with it the first major change to the Inheritance Tax law since 2007.
The government is proposing that anyone who, on their death, passes their home to their children or grandchildren, they will be entitled to claim an additional amount of Inheritance Tax relief, provided that your Estate does not exceed £2,000,000. If you are married or have entered into a civil partnership, this new relief can be transferred to your spouse/civil partner if you are leaving everything to them on the death of the first of you.
This relief is going to be called the Residential Nil-Rate Band. Currently we have an Inheritance Tax allowance of £325,000 before any Inheritance Tax would be payable and this rate is currently 40%. Widows or widowers who have inherited everything from their late spouse/civil partner have a total Inheritance Tax allowance of £650,000 as they inherit the deceased spouse’s own tax allowance too.
In addition to these allowances, the residential nil-rate band allows your Executors to claim an additional amount of relief before your Estate will pay Inheritance Tax. The relief threshold for 2017/18 is going to be £100,000 and this is ultimately set to rise to £175,000 in 2020/21. If you leave everything to your spouse/civil partner on your death, they will also inherit this particular tax relief.
So how will this law change effect you?
The effect is such that if you die after 2020 and you have inherited everything from your late spouse/civil partner, your Estate can be worth up to £1,000,000 before any Inheritance Tax is payable.
The significant condition is that you must own a home as your main residence (not a second property) and you must leave it to your children or grandchildren on either the death of the first or second of you. Reference to children here also includes step-children, adopted, foster children and sons/daughters-in-law.
Smith Partnership always recommend that you keep your Will under regular review to cater for any change in circumstances. This includes ensuring that any changes in the law do not adversely impact upon what you would want to happen on death.
If you’d like to find out more about the legal services offered by Smith Partnership, don’t hesitate to contact us via firstname.lastname@example.org. Alternatively, speak to a member of our team directly on 0330 123 1229.