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.
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.
Please contact us on 01708 229 444 for more information or visit the Wills, Trusts & Tax page to find out more.