taxsmThose who attended our recent Inheritance Tax Seminar were given the inside track on the changes unveiled in the Summer Budget that will reduce the burden of Inheritance Tax (IHT) for most families by making it easier to pass on the family home to direct descendants without a tax charge. The measures will come into effect for relevant transfers on death on or after 6 April 2017.

The seminar, which was jointly hosted by the Financial Planning Group and Stone Rowe Brewer LLP, outlined ways in which we can all benefit from understanding the implications of the Government’s changes, as well as considering alternative strategies to best prepare for the future and various options that are available to minimise the tax liabilities we all face.

The details below give a broad outline to the new changes, however, you may wish to consider calling one of our team who can give you a more personal interpretation and some clarity on how it will affect you and your family – we would be delighted to arrange a meeting at our office in the heart of Teddington and run through some of the options that were touched upon in November’s IHT seminar.

Please call us on 0800 731 7614 or e-mail enquiries@fpgonline.co.uk

The New Nil Rate Band Changes

Those most likely to be affected by the changes are individuals with direct descendants who have an estate (including a main residence) with total assets above the Inheritance Tax (IHT) threshold (or nil-rate band) of £325,000 and personal representatives of deceased persons.

This will be achieved by the introduction of an additional nil-rate band when a residence is passed on death to a direct descendant.

This will be:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

It will then increase in line with Consumer Prices Index (CPI) from 2021 to 2022 onwards. Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.

The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.

There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The existing nil-rate band will remain at £325,000 from 2018 to 2019 until the end of 2020 to 2021.

The changes will apply to reduce the tax payable by an estate on death; it will not apply to reduce the tax payable on lifetime transfers that are chargeable as a result of death.

The main residence nil-rate band will be transferable where the second spouse or civil partner of a couple dies on or after 6 April 2017 irrespective of when the first of the couple died.

The nil-rate band will continue to be £325,000 from 2018 to 2019 until the end of 2020 to 2021.

Please call us on 0800 731 7614 or e-mail enquiries@fpgonline.co.uk to arrange a meeting regarding how these chances affect your financial situation.

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