No one likes thinking about death and as a result many of us don’t get round to making a will often leaving our loved ones with a bit of a headache when the time comes. We’d strongly suggest if you own your own home, either with a spouse or civil partner or indeed by yourself, then you need to consider changes which are being introduced in 2017.
Currently everyone is currently entitled to pass on £325,000 of wealth tax free. This is known as the Inheritance tax (IHT) “nil rate band”. Any unused nil rate band on death can be transferred to a surviving spouse or civil partner. Therefore up to £650,000 can be passed on to future generations free of IHT. The value of an individual’s estate in excess of their nil rate is subject to IHT at 40 %.
From April 2017 there is a new family home allowance, this will be introduced gradually over four years, with the allowance worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20 and £175,000 in 2020-21. This additional perk will also be transferable between married couples and civil partners even if one partner dies before its introduction in 2017. However estates worth more than £2m will lose some or all of the family home allowance, which will be tapered at a rate of £1 for every £2 over the £2m threshold.
To qualify for this allowance, the property must have been the individual’s main residence and must be left to one or more of their direct descendants. This includes children, stepchildren, adopted children, foster children and grandchildren, but not other relatives such as nieces and nephews.