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The reduction in the burden of inheritance tax (IHT) as of 6th April 2017 will help most families to pass on the family home. However, parents and grandparents may need to revise their wills to take advantage of the changes.
The “nil rate band”
An individual may give away an amount that is effectively exempt from IHT. This is known as the “nil rate band” and currently stands at £325,000 for single people and £650,000 in total for people who are married or in civil partnerships. Above the nil rate band, IHT is usually charged at 40% (although there are important exceptions, e.g. when the person inheriting is an exempt beneficiary, such as a spouse).
The “residence nil rate band”
In response to soaring house prices, as of 6th April 2017 there will be an additional “residence nil rate band” of £100,000 (or £200,000 in total for those who are married or in civil partnerships). This brings the total nil rate band available to £425,000 for single people and £850,000 in total for people who are married or in civil partnerships.
The rules determining when this extra nil rate band can be claimed are complex. Among other criteria, it is available only in situations where a parent passes on a residence to his or her direct descendants (children, grandchildren, etc.).
We recommend that you seek professional advice regarding whether your estate might benefit from the changes to the rules. Your current will may not be drafted so as to take into account the new rules and may result in an unnecessary tax burden for your estate.
Sinclairslaw is one of the leading law firms in England and Wales for Wills & Probate matters. Please contact Ms Vanessa Collins, who leads our specialist Wills & Probate team, on 0208 891 4488 or at email@example.com should you require more information about our specialist Wills & Probate services.