Important Inheritance Tax update
You may have read about the proposed introduction of an additional inheritance tax (IHT) nil rate band in respect of a married couple’s home. We now have some more concrete information on how this will work in practice from its introduction next April (it is being phased in over three years and will apply in full from 6th April 2020.
Potentially, if a married couple leave their estates outright to each other, then onto ‘lineal descendants’ on the second death and they own their own home, then they will be entitled to two additional ‘residential nil rate bands’ of up to £175,000 each, which in addition to their own nil rate band and transferable nil rate band totalling £650,000, will potentially give them £1m free of IHT.
The rules are overly complicated and it is inevitable that Executors wishing to take advantage of this new allowance will need to take professional advice. But what do you need to do now? Making sure your Wills are up to date is key. Keeping good records if you sell a property is also important. It is possible in certain circumstances for Executors to claim this allowance even if the family home has been sold a number of years prior to the death. Keeping a copy of any ‘completion statement’ with your Will would be helpful. There are particular points to take advice on if they are relevant to you. Firstly, if you have left your estates to grandchildren and specified any age of inheritance, you will need to review this with your solicitor. Or, if you are a widow or widower and have already set up a nil rate band discretionary trust using a ‘charge’ over your home. This will need to be reviewed, so that the full residential nil rate band can be used in respect of your property. And lastly, if you are lucky enough to be worth over £2m, then this new allowance is ‘tapered’ and eventually reduced to nil if you own over £2.2m. So careful planning is in order.
For more information on the nil rate band or to make sure your Will is up to date please contact Christine Butterfield at Battens Solicitors, email firstname.lastname@example.org or phone 01305 216305.
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