Inheritance Tax (IHT) latest from the Summer Budget 2015

The Government has announced the IHT nil-rate band will remain frozen at 325,000 until April 2021 a further three years beyond its previous date

With regard to your own home, your main residence, the inheritance tax nil-rate band is to change starting on 6 April 2017 and be fully implemented as late as 6 April 2020. An additional inheritance tax nil-rate band allowance is to be introduced when a residence is passed on death to direct descendants, they are:

One spouseTwo spouses
2017/18100,000200,000
2018/19125,000250,000
2019/20150,000300,000
2020/21175,000350,000

If there is any unused nil-rate band, it will be transferred to a surviving spouse or civil partner. When added to the existing nil-rate band of 650,000 (2 x 325,000) this could provide a total nil-rate band of 1 million for a married couple or civil partners.

From 2021/22 and beyond the nil-rate band allowance will be increased in line with the cost price inflation, or CPI.

This new nil-rate band will also be available when a homeowner downsizes or ceases to own a home on or after 8 July 2015 and passes assets of an equivalent value on death to direct descendants up to the value of the additional nil-rate band.

There will also be a tapered reduction of the additional nil-rate band when a net estate value is over 2 million, this will be at a rate of 1 for every 2 over the threshold.

Beyond April 2017 a non-domiciled individual will acquire deemed domicile for IHT purposes if resident for 15 out of 20 years. The aim is also to treat individuals born in the UK to parents who are domiciled here as UK domiciled while they are here in the UK.

Also, if you are a non-domiciled individual IHT will be payable on all UK residential property you own from April 2017, however you own it including property held indirectly through an offshore structure regardless of their status for tax purposes.

New rules will be introduced on IHT avoidance to target tax avoidance through the use of multiple pilot trusts set up on different days, this isnt new news but again shows that the Conservative Party are following through with their promises.

As ever, if you would like to chat through your IHT issues, please do not hesitate to get in touch, talking is free so please contact us here.

 

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