Anyone who has made a Will knows that it needs to contain an appointment of at least one Executor. The role of an Executor is to administer your Estate when you pass away, wind up your general affairs and ultimately distribute your estate to the people you have chosen to benefit. Whilst this brief outline makes this role sound straightfor...
Inheritance Tax is considered the least popular and most complex tax in this country. However, a new allowance to offset IHT and new reforms of the IHT system are afoot.Inheritance Tax (IHT), on the face of it, is a relatively simple concept. When you pass away, if your assets exceed the available allowances then IHT is paid at a rate of 40% on wha...
Inheritance Tax (IHT) is charged at a rate of 40% on the value of an estate above the NRB after taking into account the value of any chargeable lifetime transfers and deducting any liabilities, reliefs and exemptions that apply.
The existing NRB is £325,000 and will remain frozen at this figure until 2020/21.
The Transferable NRB
Where an estate qualifies for spouse or civil partner exemption, the unused proportion of the NRB belonging to the spouse or civil partner that dies first can be transferred to the estate of the surviving spouse or civil partner so that the value of their estate up to £650,000 is exempt from IHT.
For deaths on or after 6 April 2017, the Additional Nil Rate Band will be available when a residence is passed on death to direct descendants. The ANRB will be in addition to the NRB, and any unused ANRB can be transferred to a surviving spouse or civil partner where the second death is on or after 6 April 2017.
The ANRB will be as follows:
£100,000 in 2017 to 2018, therefore creating a total tax free allowance of £850,000 on second death
£125,000 in 2018 to 2019 therefore creating a total tax free allowance of £900,000 on second death
£150,000 in 2019 to 2020 therefore creating a total tax free allowance of £950,000 on second death
£175,000 in 2020 to 2021 therefore creating a total tax free allowance of £1,000,000 on second death
The government has forecast that 63,000 estates will have an IHT liability by 2021. This is largely due to the expected increase in the value of houses. It is forecast that the additional IHT free band will reduce that figure to 37,000 estates.
The Conservative Party’s general election manifesto includes a commitment to introduce a new transferable ‘family home allowance’ of £175,000 per person from April 2017.
This will enable more home owners in the UK to pass their property to their children free of Inheritance Tax (IHT) after their death.
At present, IHT is payable at a rate of 40% on the value of estate assets in excess of the tax-free allowance known as the nil rate band; this is currently £325,000 per person. Married couples and civil partners can transfer their unused nil rate band to each other on first death therefore bringing the total tax-free allowance on second death to £650,000.
The proposed family home allowance would bring the total transferable tax-free allowance for married couples and civil partners to £1,000,000 thereby allowing parents to pass on their home to their children without any IHT liability on the death of the surviving parent.
The new allowance would be gradually reduced for properties worth more than £2,000,000, reaching zero for homes worth more than £2,350,000million.
The Conservative Party also announced that the full increased transferable amount will be applied retrospectively. Therefore if one spouse or civil partner has died before the policy comes into effect it would still benefit existing widows and widowers.
On a note of caution it should be remembered that the Conservative Party reneged on a previous pledge to increase the IHT allowance. The latest pledge raises hopes again for millions that they will be able to pass on their assets to their families free of tax.
Find out more about how this will affect your estate
Pinney Talfourd Solicitors has a large team of experienced private client lawyers who can reduce or even eliminate your liability for inheritance tax. We can also advise on the best way to retain your wealth with the use of trusts and careful tax planning.