As we all start to digest the detail from the recent summer budget announcements, the much anticipated changes to inheritance tax thresholds was finally confirmed.
At present, inheritance tax is payable at 40% on the value of an estate in excess of the tax free allowance of £325,000. Married couples and civil partners can pass the allowance on to each other to create a total of £650,000 at the nil rate band on second death.
The summer Budget today confirmed that the government will introduce an additional nil-rate band when a residence is passed on death to direct descendants i.e. children and grandchildren. We will see a phased introduction of this additional allowance;
£175,000 (2020-2021) (Source FTAdviser)
It will then increase with CPI from 2021-2022 onwards.
The suggestion is that it will also be available when a person downsizes or ceases to own a home on or after 8th July 2015 and estates of an equivalent value up to the value of the additional nil-rate band are passed on death to direct descendants – but we will need to see how the technical reality of all cases of this nature play out.
Mr Osborne also advised that there will also be a tapered withdrawal of the additional nil rate band for estates with a net value of more than £2m.
Statistics suggest that only 1 in 10 estates currently pay the tax – is this your clients biggest issue in planning their retirement and future legacy?
A full briefing note of what these changes mean for you and your clients is currently being compiled. Drop us an email if you would like a copy and we will forward this to you as soon as this becomes available.
Don't forget, we offer full training on all aspects of Estate Planning & our next available date is;
Wednesday August 19th - The Bentley Hotel Lincoln