Posted by bridgendwills on October 1, 2015

Inheritance Tax Threshold Provisions to be Extended to Take Account of the Family Residence Passing to Direct Descendants

The Chancellor has announced in his summer budget an increase in the nil rate band for inheritance tax. The measure will see an additional nil rate band apply to the residence of a deceased which is passed to direct descendants.

The introduction will be staggered at £100,000.00 in tax year 2017-18.

£125,000.00 for 2018-19

£150,000.00 for 2019-20

£175,000.00 for 2020-21.

It will then increase in line with the Consumer Prices Index.

It will be possible to transfer any unused nil rate band to a surviving spouse or civil partner meaning potentially a combined nil rate band of £1 million.

The measure will apply to deaths after 6th April 2017.

It will not apply to gifts during lifetime which become chargeable on death, as a result of the donor dying within 7 years of the gift.

Where a deceased no longer owns a property or has downsized to a less valuable residence on or after 8thJuly 2015 that part will still attract the relief as long as that smaller residence or assets of an equivalent value is passed to a direct descendant.

The exact way this will be dealt with in practice is still to be determined.

A direct descendant includes not only children and grandchildren but also step-children, adopted children and foster children.

Large estates may not benefit as a taper threshold will apply to net estates over £2 million.

The Chancellor has also confirmed that the current nil rate band of £325,000.00 will remain in force until the end of the tax year 2020-21.